KARACHI: Stocks fell in the outgoing week as investors stood on the sidelines after being spooked by political turmoil and the rebalancing by global index provider MSCI due on the last day of trading (Nov 30).

The KSE-100 index was dragged down 238 points (or 0.59 per cent) to close at 40,010 points. During the week, the benchmark index breached 40,000-point psychological level for the third time since October. In November, the KSE-100 index was up 1pc against a drop of 6.5pc in October. The market is down 16pc since the beginning of 2017.

In the outgoing week, the market would have seen more erosion had the Islamabad sit-in not ended following successful negotiations. Shrewd investors took any upside during the week as an opportunity to book profit. The silver lining in the otherwise dry and drab week was the successful issue of euro bond and sukuk in the global markets.

Foreign investors sold stocks worth $39.5 million against a net outflow of $6.28m in the preceding week. On Thursday, major foreign selling of $20m was witnessed on account of the rebalancing in the MSCI Emerging Market Index in which Engro Corporation was excluded from MSCI mid-cap stocks. Foreign selling in fertilisers amounted to $29.5m, commercial banks $5.5m and cements $3m. Foreign buying in oil marketing companies was to the tune of $2.4m.

On the local front, individuals were buyers of shares worth $8.6m, insurance companies $8.5m and corporate entities $7.3m.

The average daily traded volume increased 20pc from the preceding week to 130m shares with major activity in K-Electric (91m shares), TRG Pakistan (62m), Engro Corporation (34m), Azgard Nine (26m) and Sui Northern Gas Pipelines (19m). K-Electric was the volume leader with an average daily turnover of 22.65m shares driven by rumours that Shanghai Electric Power was still showing interest in acquiring a major shareholding in the company.

Meanwhile, the traded value surged 63pc to $76.3m due to a high turnover in blue-chip stocks. Engro Corporation saw a turnover of $21m, Sui Northern Gas Pipelines $5m, Attock Refinery $4.1m and Habib Bank $4m.

Biggest laggards during the week, according to Topline Securities, were Pakistan Petroleum that lost 3pc, Sui Northern Gas Pipelines 8pc, Lucky Cement 3pc, Dawood Hercules 5pc and Hub Power 3pc, which eroded 235 points from the index. United Bank gained 5pc, Engro Corporation 3pc, Pakistan Tobacco 13pc, TRG Pakistan 9pc and MCB Bank 2pc, adding 248 points to the benchmark.

Some important data points during the week included the central bank’s announcement of monetary policy wherein it decided to keep the policy rate unchanged at 5.75pc, which was largely in line with market expectations.

Improved liquefied natural gas (LNG) imports raised concerns about domestic oil production whereby several furnace oil-based independent power producers (IPPs) stopped operations. This caused refineries and IPPs to remain in the limelight throughout the outgoing week. Fertiliser off-take remained strong as the Rabi season kicked in. The government sought bids by Jan 2 for financial advisers’ consortium to privatise Mari Petroleum.

OUTLOOK: The KSE-100 index is currently trading at a price-to-earnings ratio of 8.2 times 2018 earnings. Arif Habib Research predicts a range-bound market in the upcoming week due to a lack of triggers. “Albeit, we expect the oil and gas sector to remain in the limelight as a result of the extension in the oil production cut; hence, increased oil prices may be seen.”

AKD Research expects market sentiments to improve going forward as political uncertainty subsides following the end of sit-ins. “The outcome of Opec’s meet remains a key checkpoint for the market with participants widely anticipating an extension of the current arrangement.”

Also of key importance would be K-Electric’s tariff review hearing by National Electricity Power Regulatory Authority scheduled on Dec 5.

Published in Dawn, December 3rd, 2017