Politics, virus to direct market down the line

After crashing over 2,000 points owing to political alarms and renewed virus scares in the outgoing week, the market is seen finding its legs on hopes the government would get back on top of its game down the line, dealers said.

Salman Ahmad at Aba Ali Habib Securities said uncertainty after PM Imran Khan’s victory in last week’s confidence vote and Election Commission’s decision to reject PTI’s plea against Yousuf Raza Gillani’s disqualification sent sentiments plummeting.

Other fundamental factors like consternations among investors over rising government securities yields and government’s decision to withdraw tax exemptions, also added to stocks battering, Ahmad said.

Volatility prevailed in the bourse in week, as after dipping more than 6.7 percent in first four sessions, the index recovered more than 1,008.32 points on Friday.

The KSE-100 Shares Index closed 4.47 percent or 2,049.27 lower week-on-week basis, while KSE-30 ended 5.34 percent or 1,024.46 points weaker over the last week.

Ali Zaidi at JS Global Capital said bears were clearly in control as they robbed the index of 2,049 points over the week.

Major selling came in from mutual funds and insurance companies; however the election of the Senate chairman kept the political heat high and investors anxious, Zaidi added.

Investor participation improved as traded volumes averaged 433 million shares/day, while daily value of traded securities improved to $138 million/day.

Another area for concern was a spike in the number of Coronavirus infections which led the government to give second thoughts to its policy of relaxing standard operating procedures (SOPs) further.

In efforts to restore the IMF program, the government took major steps during the week such as approving the SBP Act and clearing the NEPRA bill, while the Prime Minister also gave his approval for abolishing a number of corporate income tax exemptions.

Analysts said recovery in international oil prices after OPEC+ meeting/depleting US inventories, and rally in international equities after OECD’s improved global growth forecast failed to support domestic equities.

On IMF demands, the government has initiated the process of withdrawing tax exemptions of up to 140 billion and revising the power tariffs upward, which dented investor morale.

Arif Habib Limited in a report noted despite PM Imran Khan’s successfully winning a vote of confidence in the National Assembly the stocks witnessed a severe hammering throughout the week against general expectations.

Concerns persisted with regards to uncertainty over the senate chairman election. The opposition’s plans regarding “Long March” towards the end of March contributed further to the prevailing political noise, the brokerage said.

For investors it remains as a source of further instability on the political front. Besides politics, pressure also came from concerns over rising inflation, creeping oil prices, withdrawal of corporate tax exemptions, and resurgence in Covid-19 cases.

Meanwhile, on Friday, investors’ expectation of the government candidate Sadiq Sanjrani’s retaining his position as Chairman Senate helped revive sentiments.

Analysts view Sanjrani’s success as a major political sigh of relief for the ruling government.

“We expect this to stimulate renewed confidence and stability in the political climate, which should help recover sentiment in the local bourse. We do highlight that rising Covid cases and oil prices could keep market in check,” Arif Habib Limited report noted.