Index hits three-year low in week on IMF jitters

Things are shaping up for another hot summer on Pakistan Stock Exchange, and there is a long way to go yet. An IMF team is in Pakistan to sort out nitty gritty of a possible bailout package. It will not going to be an easy ride for Islamabad.

The blue-chip KSE-100 share index is now negative for the year. The market remained red for the whole week, where all sessions closed red and investors remained cautious over ongoing talk with the IMF team. Moreover, not-so-excited corporate result season further push down the index. . Resultantly, benchmark index lost 2.71 percent during the week, closing at a three-year low index level of 36,123 points. Average volumes dropped 14 percent to 105 million shares and value traded fell 13 percent in regular market. Similarly, in future market volume dropped by 66 percent to 44 million compared to previous week of 128 million shares. Negative sector-wise contributions came from oil and gas exploration companies (308 points) amid fall in international oil prices, commercial banks (171 points), fertilizers (148 points), power generation and distribution (89 points) and oil and gas marketing companies (70 points).

On the flip side, sectors that contributed positively include tobacco (27) points and insurance (5 points). Scrip-wise negative contribution came from PPL (125 points), OGDC (90 points), POL (78 points) and HBL (73 points). Whereas, positive scrip-wise contributions came from PSMC (24 points), PMPK (20 points), HMB (12 points) and PAKT (7 points). During the week, foreigners were net buyers of $4.76 million worth of shares. Among local investors, banks were net buyers of $1.71 million while mutual funds were net sellers of $13.4 million. Individuals on the other hand were net buyers of US$2.2 million.

Engineering, oil and gas exploration and refineries were major sectors to underperform the declining index, while tobacco and cable and electrical goods were the best performing sectors during the week. Fauji Foods Limited was the worst performing stock, losing 11 percent after Inner Mongolia Yili Industrial Group Company Limited withdrew its intention of acquiring a 51 percent stake.

Concerns over ongoing talks with the IMF regarding a potential bailout package kept investors on the back foot. The next round of technical talks with the IMF will commence during the month for bailout package and finalization is probable at the end of the month.

“We foresee the market to continue languid until any positive sentiments boost investors’ confidence,” said an analyst at Habib Metro-Finance Limited. “Therefore, staying on the sidelines with ample liquidity for value hunting in blue-chip stocks is a wise strategy.”

Analysts said volumes usually dry out in the month of Ramzan given shorter trading hours. Albeit, with budgetary proposals following in, we believe certain sectors/scrips may come under limelight,” Habib Metro analyst said. “Whereas, staff level agreement of the IMF program is expected to restore confidence of the market. We advise investors to accumulate stocks with a long term view.”

Another analyst at BMA Capital Management said the upcoming week is expected to see investors attuned to news flow on the progression towards the IMF program.

“Fresh macro data points such as trade figures and key sectoral offtakes (fertilizer and autos) might be keenly tracked,” he said. “With the FATF meeting scheduled for 15-May’19 and initiation of shorter trading hours owing to advent of Ramadan, we eye muted market activity.”