KARACHI: It was by and large a lacklustre week for stocks. The bullish momentum fizzled out and the Pakistan Stock Exchange (PSX) consolidated at the current levels. Some support to the index came mid-week as the market prepared for the signing ceremony of 40 per cent stake sale-and-purchase agreement with the Chinese consortium on Friday.

During the outgoing week, the KSE-100 index gained 154 points, or 0.3pc, and settled at 49,365.

Investors were spooked by various factors, including the uncertainty over the outcome of the Panama Papers case being heard by the apex court, the foreign outflows (almost as massive as the previous week at around $47 million), and selling by local mutual funds after the Securities and Exchange Commission of Pakistan bound them to maintain at least 5pc of net assets in cash.

Major foreign sell-off was seen in the banking sector, followed by textiles and electricity companies. “It is interesting to note that foreigners have sold a huge $434m worth of equities since the start of 2016, but the benchmark KSE-100 index continues to provide phenomenal returns mainly on the back of strong domestic liquidity,” analyst Faizan Ahmed at JS Global said.

During the week average daily turnover dropped 21pc to 489m shares while the average daily traded value was down 2pc to $212m. Second-tier scrips continued to lead volumes with trading of 65m shares seen in Telecard, 62m in Faysal Bank, 59m in K-Electric, 51m in Sui Southern Gas Company, and 48m in the Bank of Punjab.

The automobiles made a positive contribution of 160 points, refineries 63 points and textile composite 63 points.

Dealers at Topline Securities pointed out that refinery remained the best performing sector during the week mainly led by the National Refinery, which saw its stock rally 16pc in anticipation of better earnings after its plant upgrade.

Abnormal activity was seen in steel stocks after imposition of anti-dumping duties by the local regulator. International Steels, International Industries and Aisha Steel Mills outperformed the broader market. Other positive contributors to the index were automobiles (up 7.2pc) and oil-marketing companies (up 1.3pc).

On the flip side, index heavyweights witnessed profit-taking as exploration and production (E&P) companies were down 4.1pc week-on-week, banks 2.6pc and cements 0.1pc. Bulk of the selling in the E&P sector was seen in the Oil and Gas Development Company Ltd (OGDC) with its stock down 8pc on reports of a proposal to sell 5pc stake by the government which raised investors’ concern over dilution in value.

According to Intermarket Securities, leaders during the week were: Millat Tractors which rose 17.79pc, National Refinery 16.01pc, Abbot Lab 13.23pc, Honda Atlas Cars 11.54pc and Nishat Mills Ltd 8.32pc which together added 264 points to the index. By contrast, OGDC was down 7.74pc, Habib Bank Ltd 4.65pc, United Bank Ltd 4.47pc, MCB Bank 2.73pc and Pakistan State Oil 4.14pc, taking away 535 points in aggregate.

Key developments during the week included: the prime minister restored subsidy on fertiliser which was earlier withdrawn by the Ministry of National Food Security and Research; the National Tariff Commission imposed anti-dumping duty of 13.17pc to 19.04pc on imports of cold rolled coils/sheets from China and Ukraine for a period of five years; and the

cut-off yield declined slightly by on government papers with heavy participation of Rs1.071 trillion while bids valued at Rs538bn were accepted.

OUTLOOK: Going forward, the tone of the market would be set by the corporate results as the result season starts. Market may also react in anticipation of the upcoming monetary policy, albeit the Panama Papers case hearing would remain important to market trajectory.

In the long term, bullish stance remained intact, based on Chinese investment under the CPEC and re-rating hypothesis on the MSCI’s emerging-market classification in June.

Published in Dawn, January 22nd, 2017