KARACHI: Trading at the stock market remained choppy during the outgoing week with the KSE-100 index recording a drop of 448 points (1.26 per cent) to close at 35,125. The index returned to the red after three positive weeks that had carried it up by 7.3pc.

The first three sessions saw the index close in negative as investors opted to take profit, scared by the political noise and heated debate over the Budget 2019-20 in the National Assembly with the opposition threatening to block its passage. Sentiments also weakened as the rupee continued to devalue, reaching a 6pc drop month-to-date.

The assertion by SBP Governor Reza Baqir on adoption of ‘market-determined’ exchange rate regime and continued monetary tightening going forward offered no help to equity investors. Reports regarding power and gas tariff hikes also surfaced during the week, further instigating market fears of continued pressure on macro indicators. The unchanged Fitch’s rating completed the bleak scenario.

However, the last two days provided diversion to investors’ sombre mood to some positive news including the satisfactory conclusion on the Financial Action Task Force front, where Pakistan got the breathing space until October when the progress would be reviewed. Shrinkage of trade deficit and the government likely to float Sukuk worth Rs200 billion next week to resolve circular debts were also refreshing developments.

Foreign selling continued, clocking in at $5.7 million compared to net sell of $4.9m last week. Outflow was witnessed in exploration and production (E&P) at $4.5m and cement $1.4m. On the domestic front, major buying was reported by individuals $7.9m and banks/DFIs $3.7m.

Average daily volume fell 8.5pc to 125m shares while value traded plunged 21pc to $27m. Leaders included Maple Leaf Cement, at 60.87m shares, WorldCall 46.49m shares, Summit Bank 39.05m shares, TRG Pakistan 38.17m shares and K-Electric 32.08m shares.

Sector-wise negative contributions came from commercial banks, decreasing by 181 points, fertiliser 88 points, cement 49 points, oil and gas marketing companies 42 points and pharmaceuticals 29 points.

On the other hand, repeated news over government’s instruction on upgrading oil refinery operations took the sector amongst laggards as refineries closed down 6pc.

Meanwhile, sectors that added to the index included power generation and distribution 38 points and E&P 31 points. Textile composite, remaining under discussion over negative implications on account of removal of zero-rated status, closed in green with 0.6pc gain.

Going forward market gurus reckoned that any positive outcome (ie Pakistan manages to avoid blacklisting) from the ongoing FATF’s plenary session could extend the relief rally witnessed in the last two trading sessions. Uncertainty surrounds the budget approval with the treasury and opposition at odds over a number of issues. It could keep investors jittery, limiting theirs’ participation. The major trigger for the market would be theupcoming IMF board meeting in early July that would consider and approve the bailout and hopefully trigger a period of stabilisation.

Published in Dawn, June 23rd, 2019