Stocks lose to bet-hedging as India launches a tariff war

Stocks on Tuesday lost for the fifth consecutive session to settle below the psychological barrier of 40,000 points, primarily dragged down by profit-taking amid escalating political tension between India and Pakistan that sent investors into a bet-hedging spree, dealers said.

Analyst Ahsan Mehanti, analyst from Arif Habib Corporation, said bearish activity continued as institutional profit taking on dismal foreign direct investment data ($1.45 billion) for July-January FY2019, and concerns over deteriorating Pakistan-India trade ties.

Mehanti said cement and textile sectors took a battering in the futures rollover week on trade disruption with India amid imposition of custom duty on Pakistani exports and likely retaliation on Indian product imports.

Concerns over instability in rupee-dollar parity and depressing data that showed foreign outflows for July-January FY2019 at $409 million contributed to a bearish close, Mehanti added.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 shares index lost 0.65 percent or 262.40 points to close at 39,957.07 points, whereas KSE-30 shares index shed 0.63 percent or 115.47 points to end at 19,338.90 points.

Of 328 active scrips, 75 moved up, 231 retreated, and 22 remained unchanged. The ready market volumes stood at 98.841 million shares, as compared to 93.001 million shares in the previous session.

Adil Ghaffar, chief executive officer at First Equity Modaraba, said investors were still on a testing drive and the overwhelming support from Saudi Arabia could not reflect in the market due to nuisances created by India. “However, portfolio managers with long term view are likely to benefit more as eventually companies will yield good results,” Ghaffar said. The stock market has been in the grip of “war of words” between Pakistan and India that resulted in harsh measures adopted by Indian side including increasing the customs duty to 200 percent on Pakistani products.

The cement exports from Pakistan are expected to face the massive aforementioned hike in duties, which would result in loss of exports worth $59 million because during the last fiscal year to India, whereas during the seven months exports reached $32 million. However, a halt in exports is likely to dilute the margins of cement companies which weighed the share price down in the range of Rs0.06 to Rs2.09. Madiha Javed, head of research from Ismail Iqbal Securities, said the market was negative as border tensions with India remained in the limelight. “Investors adopted a wait-and-see approach with market volumes continuing to remain very low,” Javed said.

Auto shares posted losses led by Pak Suzuki Motors, down by Rs 14.84, Indus Motor down Rs8.87, and Honda Atlas by Rs4.87. The companies were down because investors continued selling their holdings as the government has yet not released the notification allowing non-filers getting to buy up to 1300 cc vehicles.

The highest gainers were Nestle Pakistan, up Rs100.00 to close at Rs8900.00/ share, and Wyeth Pakistan Limited, up Rs36.54 to finish at Rs1101.56/share. Companies that booked highest losses were Colgate Palmolive, down Rs40.00 to close at Rs2000.00/share, and Services Industries Limited, down Rs20.00 to close at Rs780.00/share. Fauji Foods Limited recorded the highest volumes with a turnover of 5.418 million shares. The scrip gained Rs0.03 to close at Rs33.60/share.

The lowest volumes were witnessed in K-Electric Limited recording a turnover of 6.343 million shares, whereas the scrip lost Rs0.1 to end at Rs6.43/share.