Stocks continue downward move ahead of MSCI transition

Stocks continued to lose the previous gains on Wednesday with the benchmark KSE 100-share Index falling nearly two percent as investors shed assets on unabated and unexpected foreign outflows ahead of MSCI transition, dealers said. 

Analyst Ahsan Mehanti at Arif Habib Limited said panic selling was witnessed on post-budget profit taking and concerns over an unexpected foreign outflow ahead of Morgan Stanley Capital International (MSCI) Emerging Markets (EM) upgrade.

US index provider MSCI reclassified Pakistan as an emerging market from frontier market status and added six securities in its main board and 27 shares in small-cap index, with effect from June 1 (today). 

The KSE 100-share Index of Pakistan Stock Exchange (PSX) lost 1.67 percent or 861.59 points to close at 50,591.57 points. KSE 30-share Index shed 2.0 percent or 545.63 points to end at 26,688.96 points. As many as 382 securities were active; of which 109 increased, 248 decreased and 25 remained unchanged.

The ready market volumes stood at 410.816 million shares as compared to the turnover of 234.587 million shares a day earlier. “Late session interest in selected blue-chip oil and banking stocks supported the index to close above the session lows,” Mehanti said. “However, flat rate of capital gains tax, higher dividend taxes and renewed concerns over rising circular debt in energy sector played a catalytic role in record fall at PSX.”

Analyst Arham Ghous at JS Global Capital said bloodbath activity was witnessed at the local bourse. “Major correction appeared in the market due to continuous foreign net outflows over the past week.”

Oil and Gas Development was down 4.35 percent, Engro Corp fell 4.49 percent, United Bank lost 4.7 percent, Habib Bank ended 4.75 percent lower and MCB Bank decreased 4.82 percent.

Analysts said profit-taking was witnessed in steel sector on the back of news that steel was set to become expensive following the budgetary measures. Industry officials expected steel price to increase between Rs2,500 and 3,000/tonne.

Moving forward, analysts expect volatility to persist in the market and recommend investors to accumulate MSCI EM stocks on dips due to the MSCI re-balancing.

Companies, reflecting highest gains, included Millat Tractors up Rs50.09 to close at Rs1,527.23/share and Unilever Foods that rose Rs40 to end at Rs6,150/share.

Companies, with most losses, included Wyeth Pakistan down Rs79.67 to end at Rs2,308.84/share and Lucky Cement that fell Rs42.38 to close at Rs859.22/share.

Highest volumes were witnessed in Oil and Gas Development Company with a turnover of 26.982 million shares. Its share lost Rs8.05 to end at Rs176.83/share. Engro Corp was the second with a turnover of 23.416 million shares. It stock value fell Rs17.51 to close at Rs372.08/share. K-Electric was the third with a turnover of 21.463 million shares. It share price inched down 38 paisas to finish at Rs7.32/share.