KARACHI: Stocks took to correction for the second consecutive week with the KSE-100 index pulling back by 400.68 points (0.98 per cent) and close at 40,486.67.

After posting stellar gains of 10pc in January, investors were generally quiet, watching the index consolidate at around the 40,500 level.

The government is fully focused on the arrival of Saudi crown prince on Sunday for two-day visit as it is pinning hopes on the kingdom’s helping hand to support the crippling economy. Memoranda of understanding (MoU) of over $21bn are likely to be signed.

The euphoria has partly drowned the host of negative factors. Market talks on the IMF bailout package which ranged from a deadlock to the government’s decision to secure loan of up to $6 billion, kept investors dizzy.

It also gave rise of rumours of increase in gas/electric tariffs for consumers and further devaluation of the rupee; Moody’s Investors Services changing its outlook for the banking system in Pakistan to negative (B3-) from stable and the European Commission including Pakistan among its adopted new list of 23 countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks were other negatives. Poor corporate earnings also dampened investor sentiments.

Political temperatures were on the rise as the Indian government accused Pakistan for the attack in Indian-held Kashmir that killed 40 soldiers. Besides, threatening diatribes, India also revoked the Most Favoured Nation status for Pakistan.

Scrips that dragged the index down were HBL wiping off 74 points, PSO losing 64 points, Pakistan Tobacco taking away 45 points, Bank Al-Habib losing 29 points and PSEL contributing 26 points to index fall.

Foreign buying continued this week clocking in at $12.1m compared to a net buy of $12.2m the preceding week. It represented third week of foreign inflows. Major foreign buying during the week was witnessed in cement ($5.8m) and commercial banks ($2.9m).

On the local front, selling was reported by Broker Proprietary Trading ($6.3m) followed by companies ($4.7m). Individuals remained the major buyers with net purchases of $5.9m worth stocks.

The trading volume during the week settled at 136m shares (down by 29pc week-on-week) whereas value traded stood at $45m (down by 28pc). Declining coal prices (down 11pc since start of December) invigorated euphoria among cement stocks in the early part of the week.

However, some selling was witnessed in the latter half on account of profit-taking.

Commercial banks, OMC’s and fertiliser dragged the index down this week, eating away 283 points, cumulatively. On the other hand, due to rising international oil prices, E&P’s offered the benchmark index some respite as it added 78 points.

Going forward, the market performance in the upcoming week hinges on the details of Saudi investment plans in Pakistan during the crown prince two-day visit. Moreover, current account deficit number for January is expected to be released during the week.

As the results season continues, several big tickets, such as PSO, FCCL, Engro, HBL, MCB, UBL and OGDC have board meetings scheduled in the upcoming week. But above all, investors would watch out development in Indo-Pak relationship as escalation in geopolitical tensions can take a toll on the market.

Published in Dawn, February 17th, 2019