Weekly review: KSE-100 sheds 0.7% amid falling volumes

Index remains range-bound due to lack of triggers.

KARACHI:

Lack of triggers resulted in a dull week at the market as the benchmark KSE-100 index shed 99 points to close below the 12,000 point level at 11,938 points during the week ended November 18.

The market failed to regain momentum following the lackluster performance from the previous week which was shortened due to the Eid Holidays. Investors stayed away from the market and volumes stood at a dismal level of 41 million shares traded, on average, per day.

The index’s decline was primarily attributable to the increase in political tensions, following the leak of a memo sent by Pakistan’s ambassador to the United States to the US military about protecting the Pakistani government from a military coup.

The fertiliser sector also witnessed a tough week, as rumors started to circulate that the price of urea would be reduced following the resumption of gas supply to the fertiliser units. As a result, Fauji Fertiliser Company witnessed a sharp decline and ended the week underperforming the market by 6.1%.

However, it should be noted the resumption of gas seems highly unlikely in the coming weeks as winter sets in and the demand for gas, especially in the northern parts of the country increases. Any restoration of gas supply to the urea manufacturers should be viewed as a short term fix, as the demand supply gap for gas can be expected to widen in the coming weeks.

Furthermore, foreigners continued to be net sellers at the bourse and offloaded shares worth $1.32 million during the week. This brought the total outflow since the start of the current fiscal year to $102 million as compared to an inflow of $101 million in the same period during the previous year, according to a report published by JS Research.

All news was not bad, however, as the energy and power sector came in the limelight following the successful appraisal drilling of the Napsha II field, which provided a slight trigger to the market. Pakistan Petroleum Limited and the Oil and Gas Development Company outperformed the market by 2% and 1.2% respectively, as a result.

Macro data was also revealed the year-on-year growth of 23% to $4.3 billion in the first four months of the current fiscal year. The remittance number for October stood at $1.1 billion, which was up by 19% over the previous year.

Average daily volumes stood at 41 million shares per day, dropping by 6% over the abysmal volumes in the post-Eid week. Average daily value fell much more sharply and stood at Rs2.17 billion per day, down 28% over the previous week. The KSE’s market capitalisation fell 1% to Rs3.1 trillion by the end of the week.

What to expect?

The market can be expected to show lackluster performance in the coming week, as the only major upcoming news is the monetary policy announcement which will be made at the end of the week. The State Bank is expected to maintain status quo in the policy announcement after an unprecedented reduction of 150 basis points in the previous announcement. 

Monday, November 14

Equities dragged along the neutral line in another sluggish session as lack of participation by local institutions and thin foreign flows kept overall activity extremely dull.

Tuesday, November 15

The stock market closed flat as political uncertainty forced big players to the sidelines.

Wednesday, November 16

For a third day in a row, the stock market closed flat as lack of triggers pushed aside any major participation.

Thursday, November 17

KSE-100 index fell after remaining stagnant for three days in a row.  Concerns that the European debt crisis could spread to US banks prompted investors to book profits, dealers said.

Friday, November 18

Stocks ended higher but in thin trade as most investors avoided taking fresh positions ahead of the weekend. The volumes were pretty low and trade was limited to a few stocks.

Published in The Express Tribune, November 20^th, 2011.