KARACHI: The stock market was able to snap four-week losing streak to close flat in the outgoing week with KSE 100 index showing a token gain of 100 points and closing at 40,243.

The market was driven largely on the news flow relating to the International Monetary Fund’s second review and the earlier week’s stunning inflation numbers at 14.6pc, which turned out to be 10-year high. It dampened Investors’ hopes of an early decision by the State Bank of Pakistan to cut down the interest rates.To the negative sentiments was added the T-bill yield, which for the 12-month instrument came higher by 39 basis points in the latest auction.

News coming out of the meeting room between the Federal Board of Revenue and the IMF provided mixed signals. Earlier there were suggestions that in order to bridge fiscal deficit, the lending agency was insisting on the imposition of new taxes to the tune of Rs200 billion along with hike in utility prices, which triggered panic in the market.

However, later on, the market took a breather on the second day and recovered on reports that IMF and FBR had agreed to imposition of no new taxes and reduction in revenue target till Jun’19. The scare of coronavirus impacted investor sentiments and like the global market, the PSX endured foreign funds’ selling throughout the week.

Uncertainty over the Financial Action Task Force (FATF) decision in its review to begin from Feb 16 seized investors’ attention with speculations on whether the country would be able to skip out of the grey list. The corporate results unveiled were generally in line with expectations.

In sync with other global markets, foreigners continued to dump equities worth $11.2 million compared to a net sell of $14.2m the preceding week.

This sell-off was witnessed in commercial banks at $3.6m and exploration and production $3.1m. On the domestic front, major buying was seen by insurance companies at $8.8m and other organisations $5.6m.

Average volume remained stable at 168m shares while mean value traded clocked in at $40m, down by 11pc. Sector-wise positive contributions came from commercial banks, higher by 123 points, cement 63 points, power generation and distribution 55 points, tobacco 24 points while insurance edged lower by 12 points.

Among scrips, gains were led by Habib Bank, up 92 points, Hub Power 83 points, Lucky Cement 45 points, MCB 39 points and Pakistan Tobacco 24 points. Going forward, the market was expected to remain range-bound on uncertainties over the Financial Action Task Force review scheduled to start in the week; anticipation of inflationary pressures likely to continue for February and the hike in T-bill yields that leaves no room for a policy rate cut.

Moreover, details of the business-to-business meetings between Islamabad and Ankara during Turkish President Erdogan’s visit would be known. On the positive side, investors may relish the rise of $91m in exchange reserves which rose to $18.7bn.

The market would watch out for the foreign portfolio investment trend as the coronavirus continues to force foreigners to flee the global equity markets.

Published in Dawn, February 16th, 2020