Stocks set for muted week as investors eye rollover

KARACHI: Stocks ended the week on a low note as investors cashed in their profits while the next week is likely to see subdued trading activity due to the rollover period and the long holidays, dealers said.

“We expect subdued interest from foreign investors in the market owing to long holidays,” brokerage Arif Habib Ltd said in a note. “Additionally, the upcoming week marks a rollover period that investors will closely monitor.”

"Moreover, we observe that stocks persistently offer attractive valuations, possibly enticing investors."

The market closed at 61,705 points, declining by 4,425 pointsor 6.7 percent week on week. Average volumes arrived at 1,215 million shares (down by 3 percent week-on-week) while the average value traded settled at $78 million (down 27 percent week-on-week).

Foreigner buying continued during the week, clocking in at $2.4 million compared to a net buy of $6.3 million in the last week. Major buying was witnessed in power generation and distribution ($3.5 million) and cement ($1.1 million million). On the local front, selling was reported by mutual funds ($14.3 million) followed by individuals ($2.6 million).

Sector-wise negative contributions came from commercial banks (1,029 points), fertilizer (785 points), oil and gas exploration companies (576 points), cement (388 points), and technology and communication (294 points). Scrip-wise negative contributors were MCB (265 points), OGDC (257 points), ENGRO (251 points), DAWH (240 points), and FFC (174 points).

The sector which mainly contributed positively was miscellaneous (16 points). Meanwhile, scrip-wise positive contributions came from PSEL (17 points), ILP (5 points), PKGP (2 points), and PABC (1 point).

Analyst Nabeel Haroon at Topline Securities said the index declined for the second consecutive week, which can be attributed to profit-taking by institutional investors and selling by individual investors to meet margin requirements against their leverage position.

Analyst Shagufta Irshad at JS Research said the benchmark index corrected 6.7 percent week-on-week to 61,705 points levels, sweeping away 4,400 points within the week. "The market is down 8 percent from its intra-day high of 67,094 seen during the last fortnight," she added.

"Margin financing triggers, profit-taking by foreigners and local institutions as the year-end approaches and a rise in international oil prices are key reasons behind the fall."

On the international front, the suspension of traffic by shippers post Red Sea attacks and the subsequent shipment delays triggered a rise in freight costs which in turn caused oil prices (WTI) to report 4 percent week-on-week increase to get to $74.5/bbl.

On the domestic front, SBP foreign exchange reserves fell below the $7 billion mark due to debt repayments. Oil imports and textile exports reported 16 percent/6.5 percent year-on-year decline during 5MFY24.

With the market undergoing a corrective phase, investors largely ignored positive news flow regarding ECC approval for the disbursement of Rs262 billion payables to IPPs to contain energy sector circular debt levels. During the week, the Asian Development Bank (ADB) also announced a $1.2 billion loan agreement with Pakistan. Along with this World Bank approved $350 million financing for Rise-II.

Major events during the outgoing week including, current account after four consecutive months of deficit recorded a surplus of $9 million in November 2023, foreign direct investment clocked in at $131 million, up 7 percent month-on-month and 12 percent year-on-year in November and fixed bond PIB auction where government raised Rs397 billion against a target of Rs190 billion whereas cut-off yields down by 7-19bps.