KARACHI: With timely elections on July 25 and the Pakistan Tehreek-e-Insaf standing out as the single largest political party, investors’ fears of a hung parliament or a weak coalition government at the centre were set at rest.

In the outgoing week, election proceedings dominated investor sentiments, guiding stock price escalations as polling formalities were completed with few occurrences of documented discrepancies. The market greeted the end to political uncertainty with good cheer as the benchmark KSE-100 index stormed to a four-month weekly high of 1,565 points (3.8 per cent) to close at 42,786. The index rallied in all four sessions of the shortened week (Feb 25 being a holiday).

Sector-wise commercial banks remained the top performing sector for the second consecutive week, contributing 368 points to the gains as the market continues to anticipate earning accretion from further monetary tightening.

Cement sector rose by 294 points given expectations of robust housing scheme under he new government, fertiliser 213 points amid recent price hike of urea, oil and gas exploration companies 184 points, and oil and gas marketing companies 133 points.

Stocks that contributed most to the index upsurge included Habib Bank, up 138 points, Lucky Cement 115 points, United Bank 91 points, Pakistan Oilfield 82 points and Dawood Hercules 76 points.

Taking advantage of positive sentiments at the local bourse, foreign investors offloaded stocks worth $0.36 million compared to net sell of $22.11m the preceding week. Outflows were witnessed in exploration and production at $6.9m and commercial banks $2.2m. On the domestic front, liquidity was provided to the market by individuals who bought shares worth $18.9m and companies $1.0m.

The optimism driven by political clarity was witnessed in participation as well. The volume during the week settled at 235m shares, increasing by 7pc week-on-week, while value traded amounted to $70m (up 5pc). Leaders included Pioneer Cement at 54.2m shares, Bank of Punjab 53.8m shares, K-Electric 48.7m, Pakistan International Bulk Terminal 33.5m shares and Lotte Chemical 33.16m shares.

In the upcoming week, the PTI-led government is likely to finalise its cabinet, legislative priorities and policy imperatives. Focus would inevitably shift on key economic challenges starting from the rising current account deficit, weak foreign exchange reserves and rising inflation.

On the political front, investors will keenly watch out for reaction from losing parties.

Among key news last week, the country’s total liquid foreign exchange reserves increased by $46m with total reserves amounting to $15.728 billion as on July 20, up from $15.682bn he week before.

MNA-elect Asad Umar, widely expected to be the next Finance Minister, stated that all options, including approaching the International Monetary Fund, were on the table to pull the country out of twin deficits and economic crisis.

Published in Dawn, July 29th, 2018