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PSX: Panamagate uncertainty taking its toll

Updated Mar 19, 2017 09:12am

KARACHI: The stock market continued bleeding last week, which eroded 782 points (1.62 per cent) from the KSE-100 index, pulling it down to 48,409.

One of the major depressing issues was the uncertainty surrounding margin financing products, which hurt volumes. Speculations about the Panama Papers case and a 10pc month-to-date decline in international oil prices gave way to the risk-off sentiment, which sent the index reeling down.

Some stock strategists still regarded the fall as a healthy correction for the market.

Sectors that caused profuse bleeding included exploration and production 222 points, commercial banks 216 points, fertilisers 117 points, power generation and distribution 52 points and pharmaceuticals 42 points.

The telecom sector was among the few gainers as it rose 1.9pc week-on-week. Major drags on the index were PPL 7pc, OGDCL 4.8pc, UBL 3.3pc, MCB 4.9pc and FFC 2.6pc, which wiped 370 points off the index. UBL and MCB pulled the index down by 76 points and 67 points, respectively. Other laggards included Habib Metro Bank and Fauji Fertiliser Bin Qasim.

Stocks that managed to close higher included Meezan Bank 6.5pc, Amreli Steels 5.3pc, Fatima Fertiliser 3.6pc and ICI 3.5pc.

On the local front, volumes remained dull with the average daily volume down 22pc week-on-week as investors were on the back foot. Volume leaders were K-Electric 100.2 million shares, Bank of Punjab 63m shares, TRG 43.9m shares and Aisha Steel 38.6m shares.

HBL recorded a turnover of 15.8m shares on the last trading day, depicting the highest volume seen since August 2007.

After a week of respite when they bought stocks worth $15.4m, foreign investors resumed selling last week, disposing of shares amounting to $11.1m. Major foreign buying was seen in the power sector $2.9m and exploration and production scrips $1.4m. Cements witnessed selling of $14.6m.

Selling was absorbed primarily by companies and insurance companies, which recorded net buying of $16.8m and $6.2m, respectively.

Important developments during the week included the FTSE’s semi-annual review that included HBL, Engro Fertiliser, Fauji Cement and Nishat Mills to its Global Equity Index Series Asia Pacific, excluding Japan. The changes will be effective from March 20.

The Ministry of Finance approved the payment of Rs6 billion to PSO to avoid international default next week against fuel supplies. Large-scale manufacturing grew 3.5pc in July-Jan while the importers’ case against anti-dumping duties on steel, tiles and paper was adjourned. Similarly, Hub Power Company declared it would divest 40pc shares in Thar Energy by bringing strategic partners Fauji Fertilizer and China Machinery Engineering Corporation with 30pc and 10pc equity stakes, respectively.

Auto sales data released by the Pakistan Automotive Manufacturers Association (Pama) showed volumes improved 24pc year-on-year in February, taking July-Jan sales to 118,000 units. Foreign direct investment increased 6pc in the first eight months of 2017-18 to $1.28bn.

Moreover, $200m additional inflows under the Coalition Support Fund materialised last week. Also, the sixth population census started last week.

Outlook:

Going forward, most pundits predict volatility to persist until the resolution of the two major sentiment dampeners: uncertainty over the verdict on the Panama Papers case and the regulator-broker settlement over margin financing products.

According to an analyst, trading is expected to remain thin in the upcoming week.

Published in Dawn, March 19th, 2017