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KARACHI: The Pakistani stock market limped back to normalcy in the outgoing week, though closing with a minor gain of 274 points (0.66 per cent) at 41,911 points.

The week also marked the end of FY18 whereby the stock exchange generated a return of negative 10pc, bringing an end to the eight-year bull run. The bourse also stood out as the worst performer among the 25 emerging markets in FY18.

The improvement in investor sentiments in the outgoing week was underpinned by attractive valuations and anticipation of strong domestic inflows from the amnesty scheme. But recovery in the last week of 2017-18 scarcely compensated for the loss of a whopping 2,043 points (4.7pc) in the preceding week, which was billed as the worst week in CY18 so far.

Extending the depressing mood of the week earlier, the index sank further down by 659 points on the first day of trading as investors worried over the increase in gas prices and uncertainty surrounding the decision by the Financial Action Task Force (FATF) plenary meeting in Paris to put Pakistan on the grey list. Once the worst was over and the Foreign Office confirmed the grey-listing, investors settled down to trade.

Foreign net selling continued for eighth consecutive week with the net sell amounting to $15.5 million, accumulating to foreign outflow of $74m for June. The foreign sell-off during the week was largely concentrated in commercial banks at $8.6m and exploration and production $2.3m. On the domestic front, major buying was recorded by insurance companies at $22.9m and Banks/development finance institutions $6.5m.

Sector-wise oil and gas exploration companies gained 70 points week-on-week with international oil prices ticking higher this week. Tobacco was up 51 points, commercial banks 45 points, oil and gas marketing companies 43 points and engineering 34 points.

During the week, top performing stocks included Pakistan Petroleum, Pakistan Oilfields and Lucky Cement which cumulatively added 223 points to the index. Other major gainers were Pakistan Tobacco with a gain of 52 points, Habib Bank 39 points, EFU General 38 points and Habib Metro 29 points. On the flip side, Bank Alhabib, Dawood Hercules and Kot Addu Power were the worst performing scrips, wiping off 104 points from the index.

Trading activity at the bourse marginally improved during the week, with average daily turnover increasing to 181.58m shares (up 6pc), while the value traded amounted to $60m (down 2pc).

With the FATF fiasco over, investors going forward are likely to shift focus towards more dominant economic and political issues (interest rate hikes, further devaluation prospects) and political (accountability court’s deadline to decide on the corruption references against Sharif family and 2018 elections).

Moreover, with start of new fiscal year, portfolio re-balancing by local funds could swing momentum accordingly, stated a major brokerage house. “Materialisation of amnesty flows coming through, we believe the market might see support,” stated another brokerage.

Other short-term triggers for the market included timely elections and peaceful transition of power in the democratic setup whereas major risks remained the long term concerns over twin deficits, Rupee devaluation, rising inflationary pressures and compressing GDP.

Published in Dawn, July 1st, 2018

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