Conflicting signals keep bulls at loggerheads with bears

The preceding week saw a tussle between buyers and sellers, as both acted on the International Monetary Fund’s (IMF) economic projections for Pakistan, however, the government directed state-run institutions supported the sagging bourse to turn tables, dealers said.

According to an analyst from a leading brokerage house, low GDP forecast by the IMF and cement price cut mid-week up in the northern and southern markets ruined investor sentiment initially. Growth in remittances, positive outcome of the finance minister’s meeting with the World Bank and IMF in the US, anticipation of another amnesty scheme together with talks of cement price restoration by cement manufacturers, revived the colour of the market.

The market during the week fell below three-year lows, but there was a general belief that for the past couple of occasions, the bourse has been getting support at around 36,750 levels.

During the outgoing week the market winds blew in all directions, with the benchmark KSE-100 index closing in green on 3/5 days and ending the week with a drop of 184 points or 0.5 percent to close at 37,338 points.

Activity improved slightly this week with a daily average volume of 148 million shares compared to an average volume of 119 million shares traded daily last week.

During the week, foreigners were net sellers of $2.2 million versus net selling of $3.7 million last week. While, among local investors, during the week, banks were net buyers of $4.0 million while mutual funds were net sellers of $3.4 million.

Negative sector-wise contributions came from cement (209.9 points), as news of cement players cutting prices eroded investor confidence, oil and gas exploration companies (63.7 points), fertilizer (39.1 points), textile composite (19.3 points), and pharmaceuticals (18.6 points).

On the flip side, sectors that contributed positively to the index, included power generation and distribution (73.4 points), commercial banks (72.2 points), oil and gas marketing companies (20 points), food and personal care products (11.8 points), and automobile assembler (11.7 points). Foreign investors remained net sellers during the outgoing week, offloading positions worth $2.1 million. This was mainly concentrated in banks and power. On the other side, cements witnessed the bulk of inflows. Amongst domestic investors, banks provided $4.3 million and companies provided most of the liquidity on the buying side.

Moreover, the pharma sector took a beating and lost nearly 1.9 percent during the outgoing week as the government initiated a crackdown against increase in medicine prices.

An analyst from Ismail Iqbal Securities said, “We expect outcomes of finance minister’s meeting with officials of IMF and World Bank to decide the direction of the index in the upcoming week.”

An analyst from BMA Capital Management said the upcoming week should see the result season in full swing, and was likely to dictate market sentiments.

Key development to look out for next week was Pakistan’s third compliance report submission to the Financial Action Task Force to be taken up for review in May. Moreover, the market was likely to track developments on the IMF programme, the analyst added.

“We expect the market to turn positive in upcoming days with triggers including amnesty announcement and agreement with the IMF (principal agreement has been reached but staff level arrangement remains pending),” an analyst from Arif Habib Limited said.