Rattled investors brace for big week after rate cut

Bulls may roar back betting on another cut in the policy rate by the central bank after a series of setbacks in the previous sessions that rattled the investors, dealers said. The State Bank of Pakistan on Saturday cut the policy rate by 50 basis points to 6.0 percent from 6.5 percent.
“Reduced interest rates will benefit leveraged companies,” said a KASB Securities report.
“Even without the cut, we have an overall positive take on the market as key sectors, such as cements and fertiliser continue to trade at decent valuations.” The benchmark Karachi Stock Exchange (KSE) 100-share Index shed 218.36 points, or 0.64 percent, to close at 33,672.72 points for the week ended 11 September. KSE 30-share Index lost 136.95 points, or 0.66 percent, to end at 20,490.88 points. Average daily turnover slid 29 percent to 205 million shares a day. Foreign inflows clocked in at $7.0 million as against $12.9 million last week.
Analyst Faizan Ahmed at JS Global Capital said volatility continued as there were no triggers.
“Moreover, fears of continued selling by foreign investors, further depreciation of Pak Rupee tracking China currency debacle, volatile oil prices, sector-specific concerns and expected selling by local funds continued to deter fresh buying in the market,” Ahmed said.
Dealers said all attention was directed to the Fed, which may push up its rate, eclipsing weak data from Asian markets and grim news from Europe. Generally, global markets were up as optimist participants were eyeing positive stimuli from central banks amid weakening global economy. In Pakistan, politics remained in the backdrop with no major developments, although National Accountability Bureau’s inquiry against the brokers spooked local investors. The oil sector rallied on the back of uptick in international crude oil prices, although it came under pressure at the end of the week. Insurance companies were upbeat after Tuesday’s recommendation by the regulator to the government for immediate implementation of compulsory group insurance. The auto sector outperformed the market on Thursday as its monthly sales showed 29 percent growth. Economic data came in with remittances declining 8.0 percent to $1.53 billion. During the last week, major results included Maple Leaf Cement and Lucky Cement.
“Delayed news of LUCK unveiling an expansion rekindled some flavour in the cement sector, while there were reports of DRAP announcing leverage to pharmaceutical companies to raise prices,” said a report.