KARACHI: Stocks remained on a roller-coaster ride in the outgoing week to finally settle with deep wounds that saw the KSE-100 index bleed by 1,708 points (4.36 per cent) and close at over two-year trough of 37,518.

Having shed 1,772 points the week before, the cumulative two weeks’ losses stood at 9pc, evidencing the worst two-week performance in 3.5 years.

Investors’ confidence was shaken as bad news continued to flow in the market. The worrisome economic outlook — further fall in foreign exchange reserves, towering circular debts and rising interest rates — drove investors out of the market to look for attractive yields in fixed-income assets.

During the week, government took the long-awaited decision of approaching the International Monetary Fund to seek $10-12bn funding but investors were worried over IMF chief’s statement hinting at stringent conditions for a bailout package.

The development was followed by a sharp bout of currency devaluation, where the rupee shed around 7pc value in the week. Panic selling in international equity markets (emerging markets down 4.6pc) further fuelled investors’ fears. The proverbial last straw on the camel’s back was the rumours of a possible exclusion of Pakistani stocks from the MSCI EM index in the next semi-annual review due in November.

The average volume surged 55pc to 176 million shares while the average traded value escalated 48pc to $52m. TRG Pakistan at 48.9m shares, Bank of Punjab 39.6m, K-Electric 34.9m, Lotte Chemical 30.5m and Engro Polymer and Chemical 26.9m led the volume leaders list.

Foreigners resorted to the largest net sale in eight weeks at $32.6m, which included some bulk trades. Foreign outflow was witnessed in commercial banks at $21.4m and exploration and production $3.2m. Foreign portfolio investment outflow year-to-date also topped at $356m.

On the other hand, mixed sentiments were witnessed among local participants as companies bought stocks worth $22.8m, followed by insurance companies $6.5m and banks $6.3m while individuals were major sellers of shares at $6.5m.

Amongst stocks, Lucky Cement and Habib Bank (both in the MSCI EM index) fell the most, declining by 11pc and 8pc, respectively — cumulatively taking away 316 points. Resultantly, commercial banks and cements were the worst performing sectors which together scrapped 595 points from the index.

Other decliners were fertiliser, lower by 212 points, oil and gas marketing companies 179 points and automobile assemblers 119 points. Scrip-wise laggards were led by HBL, down 166 points, Lucky Cement 149 points, United Bank 84 points, Pakistan State Oil 72 points and Fauji Fertiliser 70 points.

Automobile and parts, engineering and cement sectors remained on investors’ selling radar given rising concerns on pricing power following the increasing interest rate and rupee devaluation.

Going forward, market is expected to remain range-bound amid economic uncertainty and the dialogue process with IMF. Also, political noise in the wake of Shahbaz Sharif’s arrest could keep investors on the back foot. The outcome of weekend by-elections would also be anxiously watched given the thin majority of the ruling party in the National Assembly.

Moreover, negotiations between the Financial Action Task Force and the government, which started on Oct 7, on steps to combat money laundering and terrorist financing will be tracked by investors. As the results season has kick-started, market watchers would hope for any positive earnings surprise that could shed the prevailing gloom and doom.

Published in Dawn, October 14th, 2018