Weekly review: Muted activity drags index 40 points down

Gloomy economic outlook and uncertainty keeps investors on sidelines

KARACHI: The stock market finished the week on a flattish note, despite a somewhat volatile week, ending a three-week winning streak to close 40 points down at 32,070 points.

The week commenced with bears maintaining a grip on the local bourse as investors reacted with panic to the declining economic indicators. The central bank informed a special parliamentary panel that inflation levels will remain elevated for two more years. This, along with a lack of positive triggers prompted investors to sell stocks and stay on the sidelines. The following session fared no better as sentiments continued to remain muted. Moreover, Imran Khan’s meeting with US President Donald Trump also failed to excite investors. Nevertheless, the index managed to inch up and finish in the green.

Unfortunately, this marginal surge could not be sustained and the index once again retreated in to the red. The dip came on back of the release of Asian Development Outlook report by the Asian Development Bank, which adversely impacted the market confidence. According to the report, the economic growth rate in Pakistan will be 2.8% - the lowest in South Asia - and the inflation rate will be 12% - the highest in the block of eight nations - in this fiscal year. The downward revision of Pakistan’s growth expectations led the index to lose further ground. However, in a remarkable comeback the index recovered most of its losses on Friday as it soared over 600 points.

“The KSE-100 index shed 677 points during the first four days of week, however, recovered most of it in the last trading session alone,” stated a JS Global report.

The recent improvement on the macro-economic front cushioned the dip and positive news flow from the US regarding the Kashmir issue also helped uplift sentiments on the last trading day of the week.

Participation slowed, as average daily turnover went down 12% to 108 million shares while average daily traded value dropped 24% to $25 million.

Meanwhile, Pakistan State Oil (PSO) recorded gain of 4.4% week-on-week as the company reported impressive earnings in its financial result for FY19. This was also amplified by the rumours of potential settlement in circular debt through Sukuk issue.

In terms of sectors, the benchmark index was mostly driven by financials (down 122 points), power generation and distribution (24 points), chemical (21 points), pharmaceuticals (14 points) and automobile parts and accessories (56 points).

Stock-wise, negative contribution was led by HBL (down 67 points), Hubco (56 points), UBL (29 points), Searle (27 points) and NBP (23 points).

Foreigners were net sellers of stocks worth $8.8 million compared to net buying of $7.75 million last week. Selling was witnessed in cement ($2.4 million) and financial ($2.2 million)

On the domestic front, major selling was reported by banks and development financial institution ($6.7 million) and broker proprietary trading ($6.2 million).

Other major news of the week included; Central Development Working Party approved five projects worth Rs11 billion, Ogra barred oil firms from opening new retail outlets, K-Electric awarded $425 million contract for 900MW power plant, government planned to grant new petroleum exploration licenses and textile exports inched up 2.3% in July-August.

Published in The Express Tribune, September 29^th, 2019.

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