KARACHI: Pakistani equities remained under pressure for most part of the outgoing week with the KSE-100 index settling at a loss of 332 points (0.8 per cent) at 40,998.

The week concluded on a negative note despite the hype created a week ago of a major inflow expected from Saudi Arabia. The optimism dampened as the announced grants were seen to be substantially smaller and in connection to China-Pakistan Economic Corridor.

Other negatives that blunted any positive vibes in market sentiments included incessant foreign selling, the usual pressures felt in the futures rollover week and the wide variations in analysts’ expectations of the hike in policy rates (between 50-100bps) in the monetary policy statement announced on Saturday.

On the macro side, current account deficit for August turned out to be surprisingly low at $600 million, down 72pc, but it failed to improve investors’ mood as they remained wary over lack of clarity on managing the external account and dilly-dallying on an entry into another International Monetary Fund (IMF) bailout.

Further, State Bank of Pakistan’s dollar reserves decreased by $293m to $9 billion as of Sep 19. Also, National Electric Power Regulatory Authority’s proposal to increase electricity tariffs (which Economic Coordination Committee later deferred until next week) dampened the market sentiments.

Foreign selling continued during the week with an outflow of $9.4m, taking the aggregate sell-off for September to $57.9m and the foreign outflows during the latest quarter to $189m.

Much of the selling was concentrated in banks and exploration and production. Among local participants, insurance companies were major buyers of shares worth $8.6m, followed by mutual funds cherry picking stocks of $4m.

Average daily volume during the week lowered by 21pc to 124m shares while the average value traded declined 18pc to $41m. Activity remained thin in blue-chip scrips, with Unity Foods at 43.8m shares, Dolmen City REIT 42.5m, TRG Pakistan 36.5m, K-Electric 28.6m and Lotte Chemical 26.8m being the leaders.

According to Arif Habib Securities, sector-wise activity was led by commercial banks at 113 points amid expectations of interest rate hike, followed by the oil and gas exploration companies 91pts given higher oil prices, tobacco 31 points, and food and personal care 27 points.

Laggards were oil and gas marketing companies which shed 106 points, automobile assemblers 104 points owing to indecisiveness on the non-filer’s status to purchase vehicles. Topline Securities calculated that the fertiliser and chemical sectors cumulatively pulled the index down by 210 points amid announcement of higher gas prices and anticipated increase in electricity prices.

Cement gained as investors flocked to get hold of stocks on rumours of increase in prices. Stocks that made main contribution to downside included Millat Tractors, down 10.37pc, Engro Corporation 2.15pc and Pakistan State Oil 3.71pc, together taking away 135 points.

With the State Bank of Pakistan accouncing policy hike at the upper end of expectations at 100 basis points in its monetary policy, going forward the banking sector was thought to remain in limelight. Market would also closely track the IMF meeting likely be concluded with their initial analysis and assessment on the country’s economy.

Any official statement hinting at Pakistan’s potential entry into an IMF programme may help in calming the market nervousness. The arrival of delegation from Saudi Arabia where quantum and areas of investment will be discussed is also an important event.

The government is also expected to finalise the recently announced proposals for supplementary budget where further fine tuning removing the requirement of tax-filer to buy new cars and houses is likely.

On the other hand, delay in arranging sufficient financing inflows in the backdrop of sharp drawdown in country’s foreign exchange reserves is likely to keep the market sentiments under pressure.

Published in Dawn, September 30th, 2018