KARACHI: There was never a dull moment in the outgoing week where investors and traders were kept on their toes as the economy countered massive headwinds that continued to raise apprehensions but those were quickly followed by hopes.

All said and done, the calculations at the close of the week showed relatively minor attrition of 373 points (0.91 per cent) in the KSE-100 index, which closed at 40,496. It carried the loss in November to 1,220 points (3pc) with bears holding sway in all the four weeks.

During the week, market remained volatile as it followed the news flow. Investors remained concerned throughout over the closed-door negotiations with the International Monetary Fund regarding the bailout.

Besides lack of clarity on terms of the talks, market was spooked over the delay in receipt of funds which could help the country replenish the fast dwindling foreign exchange reserves and tide over the poor balance of payment position.

The market took finance minister’s assertion that Pakistan did not face a balance of payment crisis with a pinch of salt. The $1bn injection in foreign exchange reserves from Saudi Arabia failed to lift investor sentiments.

Other than that, rupee out of the blue hit an all-time low against the dollar on Friday morning, sending shivers in the money and equity market. Although the local currency managed to recover part of the losses in intraday trading, it shook the confidence of investors.

The second surprise was provided by the monetary policy that came after trading hours at the stock market and stipulated spike in policy rates by 150 basis points to 10pc, taking the 2018 year-to-date rate upsurge by 425bps. Analysts were bewildered as the consensus anticipation was a hike by 100bps.

Sectors benefiting from the hike, such as banks, traded in the green for much of the week whereas other major sectors such as cement and fertiliser displayed poor performance as costs of financing would rise, along with risk of cost overrun on expansions.

Moreover, foreign investors on Friday rebalanced their portfolios after MSCI reclassified Lucky Cement and UBL to MSCI small cap from Global Standard Index Pakistan, resulting in net foreign selling of $33m.

Sector-wise negative contributions came from cement, losing 254 points, fertiliser 106 points, oil and gas marketing companies 100 points and engineering 58 points. On the flip side, gainers were commercial banks, adding 231 points and oil and gas exploration companies 159 points. Scrip-wise, major laggards were Lucky Cement, down 107 points, Engro Corporation 83 points and Sui Northern Gas Pipelines 42 points while Pakistan Petroleum added 67 points, MCB 54 points and Oil and Gas Development Company 52 points.

Foreign selling continued unabated, clocking in at $51m during the outgoing week, taking the sell-off in November stood to $100m - the highest in 18 months, with 2018 year-to-date net foreign selling at $509m. On the domestic front, major buying was recorded by insurance companies of shares worth $25m and mutual funds $12.3m. Traded volume receded 3.1pc to 152m shares while the traded value increased 29pc to $72m.

Going forward, market pundits anticipate negative sentiments to prevail until there is clarity on the bailout amount by IMF a s well as the conditions attached to the package. Further, the rise in interest rates is also expected to keep investors cautious as highly levered companies could face hit on their earnings.

Published in Dawn, December 2nd, 2018