Stocks trendless as political noise drowns out positive notes

Stocks scuffed in a trendless trade through the week ending on November 03, 2017 as continuous foreign selling and political rattle stole the spotlight of Standard & Poor’s positive Pakistan review and decent earning announcements, analysts said on Saturday. 

“Developments on political front continued to haunt investors in the earlier part of the week; however, recovery, witnessed later, helped the index to close flattish,” Faizan Ahmed, an analyst at JS Global Capital, said.   The KSE-100 shares index shed 0.1 percent or 41.41 points to close the week at 41,064.00 points, while KSE-30 shares index gained 0.3 percent to end at 20,939.98 points.

Nevertheless, the overall trading volumes remained thin during the week and the average traded volumes declined by 13 percent to around 117 million shares a day. 

Institutional investors did the most of the buying and insurance companies stood out as the net major buyers after purchasing equities worth $11 million, followed by mutual funds with a net buying of $10 million. On the other hand, foreign investors emerged as the net sellers in the week by causing an outflow of $30.7 million.

An analyst at Topline Securities said the market broke down through the psychological support barrier of 40,000 points due to foreign selling in the first two days of the week -attributed to month end rebalancing- and political uncertainty.  

“Thereafter, value buyers’ consistent purchasing at bargain levels, supported by oil, sustaining at near two-year high of $55/bbl, resulted in a strong rally, which led the market to close above 41,000 points level,” the analyst said.

Heavyweight oil and gas exploration companies (E&Ps) surged 8.0 percent -- recovering international crude oil prices – and remained the major contributors in keeping a drop in the points in check. 

Apart from E&Ps, almost all heavyweights such as cements, down 4.0 percent on unclear future of prices, oil marketing companies (OMCs), down 1.0 percent, and banks, down 1.0 percent, kept pressure on the index.  An analyst at Elixir Securities observed that in addition to higher global oil prices, the 21mmcfd discovery made in Tipu-1 Exploratory Well by Mari Petroleum Company Limited (MARI) and speculation in the market that PPL may be included in the MSCI EM Index, the announcement for which is expected on 13th November, also boosted the sector.

“The outgoing week also saw the end of the result season, which brought the ongoing political noise to the forefront. During the week, the ruling party nominated Shahbaz Sharif as the next candidate for the office of prime minister and subsequently the ex-PM Nawaz Sharif also presented himself in the courts marking an ease-off in the ongoing tension and the possibility to an agitation,” the analyst added.

Notwithstanding the strength of the real economy, the market will continue to remain anchored by the ongoing political fiasco. In the coming week, Finance Minister Ishaq Dar is due in the NAB court. The progress on these cases will remain of key importance for the market owing  going forward to the possibility of another round of agitation and also because of his role as the sitting finance minister.