Stocks seen wary of political flash points

KARACHI: Despite two stellar last sessions, stocks ended the outgoing week on a dim note over the last and are expected to be mixed down the line as political risks are far from over.

Pakistan Stock Exchange’s benchmark KSE-100 Shares

Index closed the outgoing week lower by 239 points or 0.6 percent to 42,861 points over the last week.

“In the upcoming week, the market may remain jittery due to political strains, as PTI has given six days to the Shehbaz Sharif government to announce elections,” brokerage Arif Habib Ltd said in its weekly stock report.

“However, it appears the government’s partial reversal of the fuel and power subsidies will gain IMF approval.

Once the loan package comes through, other sources of FX should also open up, which will be a positive for the market.”

According to the report, the market opened the outgoing week on a negative note, due to uncertainty over the outcome of the IMF programme and the central bank’s monetary policy meeting that increased the interest rate by 150bps.

“Consequently, this shoved the rupee down to an all-time low of Rs202/dollar,” it said.

On the political front tensions were high as PTI marched towards the capital, mounting pressure on the market.

However, things turned for the better when the ex-PM Imran Khan postponed the march for 6 days.

Investor confidence revived towards the end of the week after the government jacked petroleum prices by Rs30/litre, paving the way for the resumption of the

IMF programme, while opening the other avenues of foreign funding.

Average volumes expanded 27 percent to 281 million shares, while the average value jumped 26 percent to $39 million week-in-week.

During the week there were reports that Saudi Arabia is in the final stages of extending the $3 billion deposit to Pakistan, and ADB is set to fund projects worth $2 billion.

Foreign selling in the outgoing week clocked in at $1.5 million compared to a net sell of $6.1 million last week.

Major selling was witnessed in cement ($1.8 million) and banks ($1.4 million).

Buying was reported by individuals ($11 million) followed by brokers proprietary trading ($2.9 million).

Sector-wise negative contributions came from fertiliser (132 points), commercial banks (76 points), cement (56 points), oil & gas exploration companies (41 points), and power generation & distribution (29 points). Scrip-wise negative contributors were FFC (63 points), EFERT (57 points), LUCK (48 points), HUBC (39 points) and OGDC (30 points).

Sectors that supported the index included technology & communication (66 points), refinery (40 points), automobile assembler (32 points), oil & gas marketing companies (15 points), and food and personal care products (14 points). Meanwhile, stocks that strengthened the index were TRG (64 points), MTL (34 points), HBL (30 points), AVN (23 points), and CNERGY (19 points).

Muhammad Waqas Ghani at JS Research said equities closed a volatile week on a negative note. However, a positive trend, which didn’t suffice to recover early losses, was witnessed in the last two trading sessions owing to some political clarity, an IMF statement, and partial increase in fuel prices.

Among the outperformers were the refinery, technology and oil marketing sectors. Fertilisers were among underperformers this week.