Stocks slide for second week as politics, economy weigh

Stocks were stuck in a downward spiral for the second straight week, ending on May 11, 2018, as mounting electioneering mercury, political frictions, macroeconomic ambiguities, and budget proposals-related disagreements, forced investors to err on the side of caution, dealers said.

An analyst at BMA Capital Management said range-bound activity was likely next week during which Pakistan’s weightage in the index was expected to go down in the MSCI semi-annual review announcement scheduled for 14th May 2018.

“However any sector specific surprise may cause a rally in a select sector as the budget review is expected to be finalised over the weekend,” the BMA analyst said.

The benchmark index closed at an 8-week low of 43,595 index points, sliding by 942 points or 2 percent, with market participation improving by 1 percent in terms of volume and 3 percent value.

Topline Securities in its weekly comment said the commercial banks remained the major decliners as the sector eroded 286 points from the index.

“Continuation of super tax and weak earnings outlook for 2018 kept banking stocks under pressure,” the brokerage said.

The Topline added that cement manufacturers had raised prices by Rs15/bag to pass on the impact of higher input cost. “Despite this increase, the sector remained in red during the week knocking out 137 points from the index,” the brokerage house said. Habib Metro Financial Services in a report said the apex court had directed leading cement players, i.e., Best Way Cement and DG Khan Cement, to find alternate source of water for their plants located near the Katas Raj temple. “The court also directed them to keep Rs2 billion as security until alternate water supply arrangements are made, keeping the stocks under duress on this account,” the report said. The brokerage expects the market will remain choppy as the country heads for transition of power towards an interim government and then general elections. “The holy month of Ramazan, expected to start next week, will also keeping the pace of proceedings in check,” the Habib Metro report said. Foreigners, offloading securities worth $4.1 million, were net sellers during the week against a net buying of 0.6 million dollars last week. Among local investors mutual funds were net buyers of $4.2 million worth of shares, whereas individuals turned out to be net sellers, unloading equities worth $1.9 million.

International Oil prices staged a steady comeback, coming within striking distance of $80/barrel-mark as US president Trump walked out of the Iran nuclear deal. Local exploration and production companies did gather a modest momentum but lack of volumes and profit taking dragged it down.

An analyst strong auto sales numbers might also trigger some buying in the sector next week; however, much would depend on political and economic scenario.

On stock specific level, Engro was up 0.29 percent after it announced it was investing $21.4 million in 330 megawatt coal-fired plant by subscribing in ordinary shares of Siddiqsons Energy Ltd.