Buyers eye triggers to take fresh positions

Buyers will eagerly eye triggers to make a decision with the result season over and policy rate announced, while last week they felt jittery over investigations into brokers’ and industrialists’ affairs by the National Accountability Bureau, dealers said. “Both the much-hyped crackdown on local brokers and selling by foreign institutions will continue to affect the market’s sentiment in the upcoming week,” said a report issued by KASB Securities said.
The benchmark Karachi Stock Exchange (KSE) 100-share Index shed 911.77 points, or 2.70 percent, to close at 32,760.95 points during the week ended September 18. KSE 30-share Index fell 785.26 points, or 3.83 percent, to end at 19,705.62 points.
The average trading volumes plummeted 34 percent to 17-weeks low of 135 million shares per day.
Foreign institutional flows remained negative, clocking in at $4.7 million in the last week compared with an outflow of $7.6 million in the preceding week.
Analyst Faizan Ahmed at JS Global Capital said investors completely disregarded macroeconomic developments, such as a cut of 50 basis points in the discount rate, a relief package for farmers announced by the Prime Minister, an expected withdrawal of gas price hike and Fitch assigning credit rating ‘B’ with stable outlook for Pakistan’s sovereign debt. “Moreover, fears of continuous foreign selling and uncertainty over the US Fed interest rate further deterred fresh buying in the market.”
Of the major sectors, exploration and production sector fell 5.4 percent despite rebound in international crude oil prices by 5.0 percent to $47/barrel, while banks declined 4.2 percent following a cut in the policy rate.
Analyst Fahad Qasim at Topline Securities said global financial markets suffered repeated blows during the week amid weak Chinese data and buzz over the US Fed’s policy meeting. An analyst at KASB Securities said index extended the long spell of high volatility and dwindling volumes.
“The surprise 50bp cut in the policy rate by the SBP (State Bank of Pakistan) did not excite the market, as the overhang from possible crackdown on large brokers and US Fed rates kept market under pressure.”
During the last week, foreigners and local mutual funds were major net sellers of $4.7 million and $4.2 million, respectively, while companies were major net buyers of shares worth $2.9 million.
Major gain was seen in sectors such as support services (up 5.4 percent) and electronic and electrical goods (increasing 2.0 percent).
Other major news included agreement between K-Electric and Chinese firms for 700 megawatts plant, a finance ministry’s plan to issue $500 million Eurobonds, 7.5 percent surge in foreign direct investment and an issue of Rs143 billion market treasury bills with yields down on short-term maturities due to a cut in the policy rate.
An analyst at Arif Habib Limited said the market may remain volatile the week before Eid-ul-Azha due to three-day future rollover week. However, with improving macro outlook, expanding regional discounts and correction of 6.0 percent witnessed in September makes Pakistan’s equities an appealing investment avenue.