Stocks end week lower; all eyes on budget

Stocks drifted lower in dull trade during the week, ended April 20, 2018, as not-so-encouraging economic indicators and uncertainty as to what the upcoming budget has in store for them in the next fiscal kept the market players largely off the field, dealers said.

“Next week is quite important as the government will unveil Federal Budget for 2018-19, which investors hope will bring some reliefs for companies and stock investments,” said Nauman Khan Head of research at Foundation Securities. “But the political situation, seen driving the market down the line, is most likely to keep the index in check.”

Khan continued that the market was facing resistance at these levels and was in dire need of positive developments on economic and political fronts to bounce back.

The KSE-100 share index index closed the week at 45,259 points, down by 1.8 percent amid lackluster activities, evident from a decline in both average daily turnover and average daily turnover value by 37 percent and 19 percent, respectively.

The market entered a losing streak driven by a mix of profit taking, uneventful result announcements, and renewed doubts on the country’s macro-economic health. The political front remained mostly calm with market pundits expecting a smooth progress towards an interim setup once the incumbent government vacates office. Analysts say yawning current account deficit, unsatisfactory earnings in big-ticket names such as United Bank Limited (UBL) and news about the exit of an overseas Oil and Gas Development Company’s (OGDC) shareowner and reports of a cement price cut in North dragged the index into red zone, drying up volumes.

Moreover, refineries also posted dismal results feeling the heat from higher oil prices and lower throughput, undergoing price hammering as both NRL and ATRL featured in the prominent loser list for the week. International oil prices raced towards 75 dollars/barrel, but local exploration and production players failed to keep pace largely remaining unmoved, with the exception of OGDC that dipped after the news that a large block of its shares is being put up for sale at a discount by a prominent foreign shareholder.

An analyst at Spectrum Securities said the KSE-100 sector-wise performance showed that banking sector pulled down the index by 267 points, owing to low profitability which decreased the income tax collection from financial institutions by 21 percent in nine months ended March 31, 2018. Moreover, cement sector dragged the index down by 200 points due to uncertainty regarding the upcoming results and the rising cost of production.

Oil and gas exploration sector eroded 197 points, due to gas production dropped to 3,828 MMCFD in March and OGDC shares offloading at the beginning of the week. During the week, foreigners were net sellers offloading equities worth of 41.8 million dollars, while on the local front, mutual funds, individuals and other organisations remained net buyers accumulating shares valuing 24.6 million dollars, 15.2 million dollars, and 5.8 million dollars, respectively.

Moreover, futures rollover week would also keep the market under pressure amid low turnover. A number of blue chips are due to report results next week and a positive surprise could ignite excitement in select scrips/sectors. Going forward, investors would closely track the negotiations between the ruling and opposition parties over the choice of the interim Prime Minister and chief ministers of respective provinces.