Stocks crunch under correction as concerns weigh

Stocks continued to crunch under correction in muffled trade through the week ended April 4, 2018, as an absence of stimuli coupled with political as well macroeconomic alarms, which are growing louder by the day, held the market proceedings on a very short leash, dealers said.

“The market remained under pressure the whole week, where all sessions closed red as investors remained cautious over the economy and effective implementation of budgetary measures,” Topline Securities said in a weekly review.

The brokerage added that unaddressed issues like Gas Infrastructure Development Charges (GIDC), capital gains tax regime, and higher taxation on dividend income kept investors on the sideline.

The benchmark index KSE-100 lost 2.2 percent or 1000 points, closing at 44,537 points at the end of the week. The traded volume went down 3 percent while traded value fell 23 percent compared to last week.

During the week, banking stocks emerged as top losers, eroding 458 points from index due to continuation of super tax in federal budget 2018-19 and Moody’s report that this tax would be the biggest challenge on banks’ profits. Habib Bank lost 7.5 percent, followed by UBL 7 percent and MCB 2 percent.

Among small scrips, Lotte Chemicals gained 7 percent during the week owing to increasing international PTA-PX margins.

Foreigners with an investment of $0.6 million remained net buyers compared to net selling of $2.8 million last week. On the other hand, among local investors, companies turned out to be net buyers with $6.4 million, whereas insurances emerged as net sellers by offloading equities worth $4.3 million.

State Bank of Pakistan (SBP) received $1 billion from a Chinese bank, which helped shore up the country’s foreign exchange reserves after consistently declining last four months. However, the market was not moved by this development.

News like tax collection numbers for April 2018, fuel price hike in the range of Rs1.70-Rs3.55/litre for May 2018 and Asian Development Bank assessment that Pakistan will not need IMF's assistance, also failed to trigger the trading activities.

An analyst at Arif Habib Limited said contrary to expectations, positive sentiments could not materialise following announcement of a budget that was popularly seen as positive for the equity market. “Due to political uncertainty (surrounding caretaker government and general elections) and concerns over balance of payments, weak sentiment prevailed in the market,” the analyst said.

An analyst from Ismail Iqbal Securities was of the view that during the outgoing week investors perceived the budget to be negative and because of rising political uncertainty as the tenure of the current government approaches an end.