KARACHI: The outgoing week turned out worst weekly performance in 67 weeks as the market saw blood on the street on most trading days. The KSE-100 index sank a record 1,934 points (4.8 per cent) and settled at 38,562.

The market started out on Monday with the index tanking 1,335 points (3.30pc), representing the largest one-day drop in 16 months. The stunning loss was a representation of the panic selling after the market was hit by a double whammy on the last trading day of the preceding week.

Bewildered participants watched with disbelief as the rupee tumbled 7pc and after wild swings, settled down on a depreciation of 3.8pc in a single day. As If that was not enough of a shock, the State Bank of Pakistan had stipulated spike in policy rates by 150 basis points against the consensus anticipation of a hike by 100bps, which continued to guide the direction.

All of that sent shivers through the country’s financial markets with analysts worrying over the negative impact on profitability of the corporate sector going forward. The prime minister distancing himself from the SBP’s rupee devaluation sent signals of a dysfunctional financial team of the government as well as rumours of a possible loss of job of the Finance Minister Asad Umar and other economic managers, which pushed market deeper in state of “uncertainty”.

Investors’ anxiety was exacerbated by the lack of clarity on financial support from China and UAE, government dithering over the decision whether or not enter another International Monetary Fund programme, global markets sell-off and fears of run on redemptions on mutual funds.

Reports of decline in SBP reserves by 7pc to $7.5 billion for the week ended Nov 30 was another sentiment dampener, since having shored up after the receipt of Saudi tranche, investors worried that the depletion of reserves could yet again leave the government scrapping the bottom of the barrel.

Foreigners continued to sell off equities for the 31st consecutive week, recording an outflow of $2.54 million. Foreign funds sought exit from the cement sector by selling shares of $1.9m and exploration and production $1.8m.

Among local investors, mutual funds were net sellers at $31m due likely to redemptions and shift in investments from equity to risk-free fixed income funds. The sell-off by mutual funds was mainly absorbed by the insurance companies that mopped up stocks of $18.9m and individuals taking fresh positions in stocks worth $12.1m.

Overall participation in terms of average daily volume improved by 7pc to 163m shares, but the average daily value traded dropped by 19pc to $58m, reflecting major activity in small cap stocks.

Sector-wise negative contributions came from commercial banks, decreasing by 343 points, regardless of 150 basis points hike in interest rate; oil and gas exploration companies amid falling oil prices at 279 points, fertiliser 264 points, and oil and gas marketing companies 232 points owing to weak sales numbers.

Major declining scrips were Pakistan State Oil, losing 125 points, followed by Engro Corporation 105 points, Oil and Gas Development Company 100 points, Habib Bank 100 points and Pakistan Petroleum 81 points.

The prime minister is scheduled to visit Karachi in the upcoming week to interact with the business and industrial leaders but no one expects much to come up that may give a big boost to investor sentiments. Market is thus expected to trade range-bound on fears over economic slowdown and uncertainty over foreign financial assistance.

Published in Dawn, December 9th, 2018