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KARACHI: Investors remained in a state of high pitch of anxiety all through the first week of the new fiscal year, witnessing turbulent trading amid heightened political noise. During the week, the KSE-100 index sank 1,623 points (3.9 per cent) and closed at 40,284 points, wiping out all of the gains accumulated in 2018.

The market turmoil was triggered by the accountability court’s announcement on Tuesday — arriving after trading time — that the verdict against Sharif family in the Avenfield reference case has been finalised. Fearing the worst, investors jettisoned shares so that the market witnessed a blood bath the next day with the index crashing by 2.9pc and marking the biggest single day decline in about 11 months.

But as the court handed down prolonged jail terms and stiff fines to Nawaz Sharif and Maryam Nawaz, the clouds of uncertainty dissipated on the last day of the week. In the 10 minutes that remained for trading after the verdict on Friday, no dramatic change was seen in the mood of the market.

During the outgoing week, investors were also spooked by the credit rating agency Fitch warning Pakistan to focus on its worsening economic conditions and depleting foreign exchange reserves.

Current account deficit also widened to $15.96 billion and inflation reached two-year high of 5.2pc, adding to investors’ concerns. Moreover, market participants kept an eye on the amnesty flows which the government affirmed had garnered good response.

Activity remained dull as most participants chose to remain on the sidelines. The average daily traded volume declined 39.1pc to 110.65 million shares, while the traded value fell 42pc to $35m. Leaders were Pak Elektron at 32.21m shares, Unity Foods 19.65m shares, Bank of Punjab 19.32m shares and TRG Pakistan 17.25m shares.

Concentrated interest was witnessed in K-Electric as the regulator announced revised tariff, albeit giving a meagre Rs0.047 per KwH raise (under operation and maintenance expenses).

Foreign selling continued during the week clocking-in at $8.7m with selling witnessed in commercial banks accounting for $2.7m and exploration and production $2.2m. On the local front, mutual funds remained the major net sellers as they offloaded shares worth $18.6m. The sell-off was mainly absorbed by individuals and banks with net buying of stocks at $9.3m and $7.4m, respectively.

Sector-wise, the market performance was dented by oil and gas exploration companies, lower by 286 points, commercial banks 279 points, cement 163 points, oil and gas marketing companies 137 points and fertiliser 118 points. Scrips that remained under greatest pressure were Oil and Gas Development Company, decreasing by 100 points, Pakistan Petroleum 97 points, Habib Bank 85 points, Nestle Pakistan 80 points and United Bank 77 points.

After accountability court’s verdict on Avenfield reference case, uncertainty is likely to prevail in the upcoming week. Investors would be watching for reactions from various political factions (most importantly PML-N). And with the general elections just around the corner on July 25, politics may continue to occupy centre stage. But market gurus said that a relief rally could not be ruled out as discounted valuations could entice investors’ interest. The economic concerns will however keep the index range bound.

Other key news impacting the market in the outgoing week included extension in the tax amnesty scheme till Jul 31, with latest reports claiming collection of Rs100bn so far; China reportedly lending $1bn to support Pakistan’s foreign exchange reserves; total foreign exchange reserves of the country stood at $16.4bn.

Pakistan Oilfields products’ prices took a big jump; non-filers awaiting FBR nod to own vehicles below 1,000cc; State Bank disposed of objections against KASB Bank merger; cement sales up 9.3pc to 2.979m tonnes in June; fertiliser off-take data depicted urea sales clocking in at 2.7m tonnes for 1HCY18, higher by 1pc compared to the same period last year.

Published in Dawn, July 8th, 2018