Pakistan-India tensions, weak fiscal position keep market under pressure. PHOTO: AFP
The market was back to the bearish mode as the week kicked off on a negative note following a deteriorating macroeconomic situation. News flow remained heavy and largely influenced performance of the KSE-100 index.
Apart from ongoing tensions between India and Pakistan over occupied Kashmir, a weak fiscal position and the Asia Pacific Group's decision to keep Pakistan on an enhanced monitoring mechanism weakened sentiment of investors who continued to offload stocks.
Despite a significant improvement in the current account deficit, investor confidence took a hit as macroeconomic worries mounted due to a massive increase in debt and liabilities. Pakistan's debt and liabilities dangerously exceeded the size of the economy and peaked to a record Rs40.2 trillion at the end of last fiscal year in June 2019.
Meanwhile, on the global front, US President Donald Trump remained in headlines due to his on again, off again relationship with China amid a new round of tariffs on each other's goods.
During the week, British Prime Minister Boris Johnson suspended parliament with the Queen's approval as fears grew that the UK would fall out of the European Union with a Brexit deal.
Tuesday witnessed some reprieve from the persistent selling as the benchmark index finished on a marginally positive note due to strong power sector earnings and announcement to privatise more public sector enterprises.
The index extended gains in the following session on the back of rising global crude prices. Moreover, the announcement by Dutch firm Royal Vopak to invest $2.8 billion in Pakistan also propelled the index higher.
However, the mood was tempered by concerns over a historically high budget deficit, which erased most of the gains.
The trend once gain reverted on Thursday as the index plunged into the red in the wake of government's planned move to divest its stake in Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL). Additionally, the resolution of gas infrastructure development cess (GIDC) issue for the fertiliser sector also impacted the market.
The downtrend continued and the KSE-100 posted losses on the last trading day of the week. Participants reacted with panic due to continued Pakistan-India tensions as the former observed Kashmir Hour to express solidarity with residents of the Indian-occupied Kashmir.
Market activity suffered during the week under review as average daily volumes went down 29% to 124 million shares, while average traded value plunged 23% to $29 million.
In terms of sectors, negative contribution came from oil and gas exploration companies (down 519 points), commercial banks (400 points), power generation and distribution (216 points), oil and gas marketing companies (160 points) and cement (139 points).
Stock-wise, the negative contribution was led by OGDC (down 247 points), Pakistan Petroleum (193 points), HBL (134 points), Bank AL Habib (79 points) and PSO (63 points).
Foreign buying was witnessed during the week which came in at $0.97 million compared to net selling of $4.97 million last week. Buying was witnessed in commercial banks ($2.5 million) and technology and communications ($1 million).
On the domestic front, major selling was reported by mutual funds ($13.5 million), however, individuals remained net buyers of $7.8 million.
Other major news of the week included gas and condensate discovery in Khyber-Pakhtunkhwa, approval of projects worth Rs579 billion by Ecnec, levy of 3% regulatory duty on cotton import, interest expressed by Royal Vopak in investing $1.5 billion in a land-based LNG terminal, in Pakistan and Standard and Poor's keeping its outlook on Pakistan stable with 'B-' sovereign rating for the long term and 'B' rating for the short term.
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