KARACHI: The outgoing week was restricted to three sessions as the market remained closed on Thursday and Friday on account of Ashura. During the week, the KSE-100 index gained 399.82 points (0.99 per cent) to close at 41,320.13.

On the first trading day, the index caved in by 400 points as investors were worried over the looming balance of payments crisis. The air was also thick with suspense over the quantum of hike in gas tariff, anticipated to be announced the next day. Investors were also spooked by talks of cut in the Public Sector Development Programme (PSDP), increase in regulatory and custom duties on a number of imported good in the amendments to the 2018-19 budget.

The following day, government announced increase in gas prices (between 10-143pc), with the rise for industrial and commercial consumers ranging from 30-57pc. But the investor sentiments received a boost as the government had finally taken a bold policy action by announcing the mini-budget to reduce the twin deficits.

Lifting restrictions on non-filers from purchase of new cars and property over Rs4 million, uniform gas rate for five export-oriented sectors and lower than expected reduction in PSDP were all encouraging for the market. The bulls took charge and tossed the index up by 717.60 points. On the final trading day, the index added 82.06 points. Automobile assemblers were pushed in the limelight with the sector contributing 148 points (2.4pc) to the index. Honda Atlas Cars and Pak Suzuki Motors hit their upper circuits as investors were enthused by the unexpected relief on non-tax filers from buying motor vehicles as well as increase in federal excise duty on imported 1,800 cars from 10-20pc.

The gas price increase was a positive for gas companies as it will allow them to pass on the cost burden to end consumers, as reflected in stock prices of Sui Southen Gas, which gained 4.7pc, and Sui Northern Gas — higher by 1.9pc.

Further, pharmaceutical sector added 83 points due to relief provided by the mini-budget on import of medical equipment. Announcement of Rs44bn subsidy for Punjab-based textile mills was seen as positive for textile sector which rose 1.1pc. On the other hand, chemical sector went down down 1.3pc as a result of expected margin risks post gas price hike.

Sectors that contributed positively were fertiliser, increasing by 99 points amid expected hike in urea price, commercial banks 83 points due to possibility of increase in policy rate in upcoming monetary policy, cement 49 points, and automobile assemblers 27 points.

Scrip-wise gainers included Engro Corporation, Engro Fertiliser, Habib Metro, Habib Bank and Pakistan Petroleum, adding 173 points. On the flip side, Nestle Pakistan took away 23 points, Oil and Gas Development Company 18 points and Fauji Fertlilser Bin Qasim 16 points.

Foreign investors sold stocks worth $12.6 million during the week which coincided with FTSE Asia Pacific index rebalancing. Foreign sell-off was concentrated in commercial banks at $4.3m, power generation and distribution $3.4m and cement $2.9m. On the local, front mutual funds led the bullish sentiment, remaining major buyers of $4.3m worth equity, followed by insurance companies $4.2m and companies $4.1m.

Despite shortened week of three trading days, average daily volume was up 13pc to 157m shares while the traded value increased 7pc to $50m.

Going forward, market watchers believe that the outgoing week’s relief rally helped dispel some of the clouds of economic uncertainty. Moreover, concerns regarding economic conditions are settling down as current account deficit during Aug’18 improved by 72pc to $600m and news of Saudi Arabia agreeing to join CPEC and invest in Gwadar to build oil city were encouraging.

But macro stability was likely to remain a major focus area. Important event in the coming week is the announcement of monetary policy. Trading activity could also remain subdued on monthly rollover of future contracts during the week while investors would also keep an eye on the political developments.

Published in Dawn, September 23rd, 2018