Market to remain dull in absence of triggers

Higher political temperature, foreign selling and difficulties in passing the finance bill unnerved domestic investors and the index lost 1.3 percent during the outgoing week, with some of the high net worth individuals picking blue chips and investment stocks.

Mostly the investors were seen booking profits pushing the benchmark KSE-100 shares index down 1.3 percent or 448 points to close at 35,125 points level. Moreover, market participation saw a dip where average daily turnover clocked in at 125 million shares down eight percent, compared with the preceding week.

Similarly, average daily turnover was registered at $27 million, down 20 percent from the preceding week.

Amongst locals, major inflows amounted to $8.7 million, while $3.4 million were witnessed from individuals and banks. Mutual funds remained net sellers worth $4.1 million. Foreign investors sold $5.9 million worth of equities during the week.

There was much movement in international oil prices, as tensions rose between Washington and Tehran after Iran shot down a US drone. This led WTI and Brent to balloon up by 9.08 percent and 5.11 percent to reach $57.19 per barrel and $64.81 per barrel, respectively.

These movements only marginally affected the local E&P sector, which closed 0.70 percent higher on week on week basis.

Local refineries were hit hard after the government gave the industry an ultimatum to either upgrade their facilities to be more environment-friendly Euro-II standard for refining oil or they would not be provided with furnace oil. This flattened sentiments surrounding the sector, as it closed 5.97 percent lower with National Refinery and Attock Refinery among the top losers, said a leading analyst from a brokerage house.

The steel sector, heavily affected by low local demand and falling margins, increased their prices during the week. This vastly improved confidence in the sector, with International Steels Limited turning out amongst the major gainers. On the other hand, the market’s views on the sugar industry continued to fade following an increase in sales tax, which led it to close the week among the worst performing sectors.

Foreign selling continued this week clocking-in at $5.7 million compared to a net sell of $4.9 million last week. Selling was witnessed in E&P ($4.5 million) and cement ($1.4 million).

On the domestic front, major buying was reported by individuals ($7.9 million) and banks / DFIs ($3.7 million). Average volumes settled at 125 million shares (down by 8.5 percent WoW), while value traded clocked-in at $27 million (down 21 percent WoW).

An analyst from BMA Capital Management said, “Looking ahead, we expect the market to remain range-bound, driven by mixed developments on political and economic front.”

On one hand, a two day visit by Emir of Qatar Sheikh Tamim bin Hamad Al-Thani (from June 22-23, 2019) was expected to bring in $22 billion investment in the country, with likely signing of several agreements. “On the other hand, we view the market to remain lacklustre in the absence of triggers,” he added.

An analyst from Habib Metro-Financial Services said, “We expect the market to continue remaining shoddy in the near-term, as volatility rages in the fallout of the budget, with major opposition political parties announcing plans for a movement against it.”

The analyst recommend staying cautious and keeping an eye for fundamentally strong scrips at attractive levels.