Investors eye politics as FTSE rebal euphoria subsides

Euphoria of FTSE rebal fizzled out in the past trading sessions and the market is now expected to remain depressed until political dust settles, dealers said.

Stocks recovered 3.3 percent in the week ended September 15, highest weekly gains in four months, as excitement related to FTSE rebalancing and rally in Habib Bank lifted overall market sentiments. 

Analyst Atif Zafar at JS Global Capital said there was some relief for investors during the outgoing week as the benchmark KSE 100-share Index recovered 3.3 percent, the highest weekly gain during the last four months. “Most of the gains stemmed from a relief rally in Habib Bank that contributed around 510 points in the total market gains of the week.”

The KSE 100-share Index of Pakistan Stock Exchange gained 3.3 percent or 1,385.47 points to close the week at 42,787.19 points. KSE 30-share Index rose 4.13 percent or 873.71 points to end at 21,979.58 points. “The week, particularly the last two trading sessions, remained all about FTSE’s latest inclusion of five stocks from Pakistan in its Asia Pacific ex-Japan Index,” Elixir Securities said in a report.

The FTSE Global Equity Index Series Asia Pacific ex-Japan Regional Index announced the results of its semi-annual review on Aug 31. The changes will be effective from the close of business on September 15. The five companies to be added to the index are MCB Bank, Sui Northern Gas Pipelines, Bank Alfalah, Millat Tractors and Thal Ltd.

“This resulted in resurgence in traded activity at the bourse during the week as opportunist domestic and foreign investors built positions ahead of the inclusion while passive foreign funds bought into the stocks on Friday,” Elixir Securities added.

The average daily volumes picked up 16 percent to 157 million shares. They, however, still remained at disappointing levels as locals continue to remain wary of domestic politics and economy.

The market was also abuzz with return of foreign buying, as weekly net activity turned positive after almost two months to clock in at $28 million compared with net outflows of $0.3 million in the previous week. Key sectors that outperformed during the week included banks up 6.1 percent and oil and gas exploration rising 3.7 percent. Sectors that underperformed were automobile assemblers down 0.2 percents and cement falling 0.4 percent.

Another highlight of the week was results for the refinery sector. FY2017 earnings growth for Pakistan Refinery came in at 370 percent, Attock Refinery (663 percent) and National Refinery (4.6 percent). The positive results were due to higher gross refining margins.  Moreover, National Savings is mulling to launch $500 million to $700 million dollar bond. Cement dispatches grew 21 percent and government allowed subsidised export of 0.5 million tonnes of sugar.

JS Global Capital, in a report, government has so far failed to come up with a concrete plan to address the concerns over deteriorating external account.