KARACHI: Spearheaded by the foreign institutional investors, the KSE-100 index crossed the psychological barrier of 30,000 points, again, on Friday, gaining 186.52 points (0.62 per cent) to settle at 30,044.89.
“Flows have overcome floods and political concerns,” asserted an analyst at brokerage KASB Securities to which all of the market concurred.
On Friday, foreign investors bought $8.34 million worth stocks taking the week’s inflow to $18.6m.
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Zubair Ghulam Hussain, head of equity sales at Foundations Securities, which caters mainly to the overseas clients, asserted: “Month-to-date foreign inflows amount to $38m and the year-to-date (since July) figure looms at $136m.”
So, while the local institutional and individual investors — fearful of the political uncertainty and economic headwinds — stood on the sidelines, the foreign investors did not act like a panic-prone herd and seized the opportunity to pick up blue-chip stocks at dips after the index had plunged by over 1,500 points post July.
Hussain insists that there is method in this madness. “While weak sentiments have played havoc with local investors, foreigners look at ground realities.”
A senior broker, who has taken a lot of flak from local high net worth client for his advice to stay safe on the sidelines, however said: “The market can expect foreigners to flee, if the government looks likely to be overthrown.”
On Friday, mutual funds were other major buyers of $4.7m worth equity. The funds had put to use the cash generated from huge sales the previous month.
“Since capital protection fund element has seeped in the new series of mutual funds, the volatility in mutual funds’ trading has increased,” explained one fund manager.
The oil and gas sector remained the apple of investors’ eye as they played safe and invested mainly in currency hedged stocks.
Over the past week, the KSE-100 index gained 531 points or 1.8pc. However, lack of clarity on the political front and limited local participation, caused average traded volume to drop by 25.9pc WoW to 130.6m shares per day, with interest mostly skewed towards second-tier stocks.
KASB Research in its review stated that locals remained cautious due to several reasons, including political deadlock; the IMF loan’s fifth tranche being delayed as the government failed to meet their 4pc power tariff hike deadline; and Moody’s terming Pakistan’s current political scenario as credit negative.
“Meanwhile, politics took a back seat midweek as focus shifted to devastating floods which have hit the North region (especially central Punjab), while its quantifiable effects remain to be assessed,” analysts said.
Brokerage AKD Securities in its weekly research report observed that while the political impasse persists, broader news flow coming through this week included lack of clarity regarding the circular debt position, which, together with uncertainty regarding future power tariff hikes, calls the IMF programme into question.
“Broad macro metrics could witness further slippage across the next few months as ongoing flooding has an impact”, Raza Jafri, head of research at AKD Securities said.
Published in Dawn, September 13th, 2014