Investors bet on earnings to claw back losses

Stocks may snap losing streak as earnings from blue-chips are expected during the next week, but foreign outflows pose a challenge to the recovery process, dealers said.

“With the major financial results due in the upcoming week, we expect the earnings announcements to drive the index performance in the coming week,” an analyst at BIPL Securities said. “However, if foreign outflows continue this may dampen the market sentiment.”

Bearish trend continued for a consecutive third week at the equity market aggravated by news that Pakistan may be placed on the global terrorism financing watchlist. Expectations that this may not happen led a relief rally on the last trading session pairing some of the losses.

Analyst Faizan Ahmed at JS Global Capital said stocks witnessed a rollercoaster ride during the week ended February 16 with the benchmark KSE 100-share Index closing almost half a percent lower.

“A plethora of macroeconomic and political news along with ongoing corporate results contributed to swinging sentiments at the bourse,” Ahmed added.

The KSE-100 shares index shed 0.41 percent or 181.7 points to close the week at 43,627.10 points. KSE-30 shares index shed 0.2 percent or 45.5 points to end at 21,850.58 points. Overall trading activity took a hit with average traded volumes declining 19 percent to 199 million shares/day.

Foreign investors remained net seller for the third successive week with a net outflow of $16.11 million. Insurance companies were net buyers of shares worth $16.8 million whereas individuals were net sellers of $6.5 million.

“During the week, market exhibited volatility due to concerns on macroeconomic front, fear of Pakistan’s inclusion in Financial Action Task Force watchlist and increasing political noise,” Topline Securities said in a weekly review report.

Nonetheless, a strong rally in banking sector was witnessed during the week on the back of lower-than-anticipated pension liability impact on the big banks. Also, a newly launched equity fund by a large local asset management led to enthusiasm in banking stocks, which helped the market pare some losses and closed marginally lower. Cement sector was down 3.9 percent on weak profitability forecasts for the quarter amidst weak retention prices. Pharmaceutical sector dropped 4.1 percent on expectations of weak results after recent rupee depreciation against the US dollar. Oil marketing companies fell 2.9 percent on profit-taking and auto sector receded 1.3 percent on resumption of old rules for imported cars. Interest in heavyweight banks (up 2.5 percent) and exploration and production sector (increasing 0.8 percent) somewhat helped market withstand the shocks, but generally weak sentiments prevailed amid persistent political noise and concerns over external debt sustainability. Foreign debt increased $5.8 billion in the past six months.

Apart from this, key highlights of the week were a notice by the Supreme Court to recover undeclared wealth of Pakistanis stashed abroad, government’s efforts to bring UK investors into divestment process of Pakistan International Airlines and Pakistan Steel Mills, fertiliser industry’s call for withdrawal of gas infrastructure development cess for urea feed gas and fall of international oil prices below $60/barrel.