Stocks yet to get out of the woods in triggerless trade

Battered stocks are looking for triggers in new government’s swiftness to deal with impending energy and urea crises, after rollover, unexciting numbers and foreigners’ pullout weighed down equities in the outgoing week, dealers said.

Hamad Aslam, director of Research at Elixir Securities said the next week will start with the much-awaited meeting of the Economic Coordination Committee of the cabinet (ECC) to take firm decisions on swelling circular debt, gas tariffs and alarmingly depleting urea inventory.

“We think that new government (however) should and will take time to address the chronic issues in the energy chain and hence no major decision is expected on resolution of circular debt,” Aslam said.

“Low inventory level of urea needs to be addressed on a war-footing basis. Proposed increase of 30 percent in gas prices for industries, if approved, would be taken negatively by chemical, glass and textile plays.”

The bears took control over the market in the outgoing week, as it lacked direction and shed two percent or 846 points to close at 41,742.24 points. Fertiliser, cement and power sectors chipped away 223 points, 224 points and 111 points, respectively from the index. Volumes also remained low with the average total volume traded on the all-share index and the main board being 177.48 million shares and 83.13 million shares, respectively.

With the results season in full swing and the futures rollover consolidation in effect, the market stayed mostly in red, especially amid a lack of positive triggers.

Foreign investors turned out to be net sellers of $9.37 million. Among the local investors, insurance companies were the largest net buyers at $5.22 million.

Faiza Mahmood, research analyst at Habib Metro-Financial Services said the prevailing economic conditions warrant a cautious stance and an advice for investors is “keep an eye on attractive valuations in fundamentally strong stocks.”

Analysts said fertiliser sector was in the limelight, as the new government looked to improve urea supplies. However, this failed to yield any positive momentum in the sector, as it was set back by the reports that the government was mulling to revert Rs10 billion subsidies allotted to the sector earlier to keep urea prices lower.

Ismail Iqbal Securities said gas tariff hike was also on the ECC’s agenda, which led to pressure in the market. The decision was, however, deferred.

“Next week we expect market to be mix,” the brokerage said in a weekly review. “Earnings announcements and the next ECC meeting are events to watch out for next week.”

Indus Motors announced encouraging annual earnings of Rs200.66/share compared to Rs165.41 a year ago, which were in line with market expectations, and a dividend payout of Rs45. Mari Petroleum announced earnings of Rs139.45/share for FY2018 as opposed to Rs82.87 in FY2017 and a dividend of Rs2.50/share and a 10 percent bonus issue.