KARACHI: The stock market in the outgoing week was the victim of heightened hostility between Pakistan and India. As stock prices plunged, small investors were further unnerved by rumours of margin calls.

While institutional participants kept their calm, cautious individual investors squared their positions to sit on cash. The situation took its toll on the KSE-100 index, which plunged by 582 points (1.4 per cent) to settle below the 40,000 level at 39,782 points.

Incidentally, while the Indian media was madly beating war drums, investors on Dalal Street took little notice and the BSE-30 index closed the week with slightly gains.

Average daily volumes at PSX during the week were extraordinary high at 728 million shares, up five per cent over the earlier week while traded value surged 18pc to Rs 17 billion.

Trading remained concentrated in ‘penny stocks’ with lead runners for the week being: WTL (214.7m shares), PACE (190.5m shares), BOP (183.9m shares), DSFL (136.9m shares) and TRG (125.4m shares).

Foreigners were net sellers of $16m worth stocks during the (four sessions) week. Chemical, banking and fertiliser sectors witnessed net foreign selling of $7.3m, $5.8m and $3.35m, respectively, whereas net inflow of $1.8m and $1.5m was seen in the textile and food sectors.

During the week’s trading, tobacco was the top gainer up 5.3pc, followed by cement and automobile assemblers, which gained 1.4pc and 1pc respectively. Fertilizer and commercial banks sectors were among the top losers as they fell 4.6pcand 1.7pc respectively. Major downside to the market was led by FFC, HBL, Dawood Hercules, Engro and UBL, which together pushed index in the red by 362 points.

According to AKD Securities, leading gainers during the week were: Honda Cars (+9.93pc), Millat Tractors (+8.50pc), ASTL (+7.95), EPCL (+6.30pcWoW) and Fatima Fertilizers (+3.68pc). Laggards on the other hand included: LOTCHEM (-10.13pc, Dawood Hercules (-6.92pc), SNGP (-6.00pc), Askari Bank (-5.24pc) and FFC (-4.84pc).

Key news flows for the week was: PIB auction yields remained largely stable with the Government raising 219bn, World Bank approved $390m loan for Tarbela fifth extension project, current account deficit for 2MFY17 clocked in at $1.3bn, expanding 92pc YoY and Ministry of Industries and Production was to seek approval of the ECC for further reduction in urea prices in order to offload 1.5m tonnes of stock.

Outlook: The major event in the upcoming week would be the announcement of Monetary Policy Statement by the SBP, which market consensus seem to suggest a status quo. But many market participants expect some pressure on equities due to the simmering hostilities with India and the internal political situation as PTI ventures into its ‘March’ on Mar 30.

Relating to the market, the rollover week could prompt selling from leveraged investors. “Trading pattern of foreign investors would be critical to determine the market direction,” said analysts at Arif Habib Securities.

On the positive side, market watchers said that the KSE-100 is currently trading at price-to-earnings (p/e) ratio of 9.5 times the 2016 earnings, which represents discount against Asia Pacific regional average of 15.1 times. “The Pakistan stocks also offer dividend yield at 5pc, over twice the DY of 2.4pc offered by the region.”

Published in Dawn September 25th, 2016