KARACHI: The stock market started on a firm footing in the first week of the new year with the benchmark KSE-100 index claiming gains of 380 points (0.13 per cent) and settle at 37,548.

There was slight effect of fresh January buying while the positive trend that followed two earlier weeks of sluggish performance was underpinned mainly by the massive gains of 929 points that the index was able to notch up on Tuesday.

That was due to investors’ frenzied buying after reports of Chinese pledge to lend $2 billion to Pakistan to shore up dwindling foreign exchange reserves. To add icing to the cake, the Finance Minister Asad Umar proclaimed that the biggest investment in country’s history was about to arrive from Saudi Arabia.

But for most of the other trading days, the index moved in wide intraday swings in essentially choppy trade as investors remained in search of triggers. The last two sessions erased the earlier day’s gains.

On the political front, noises simmered down amid delay in the ex-president’s trial following the Supreme Court’s directive to review the list of people placed on the exit control list. The ruling party’s clarification that it had no intention of imposition of governor rule in Sindh helped the temperatures to decrease.

US President expressed his desire to meet Pakistan’s new leadership soon in order to strengthen bilateral ties, which also set some of the concerns at rest. On macro side, there were mixed signals as the Pakistan Bureau of Statistics reported below expected inflation of 6.17pc for Dec’18 against the consensus estimate of 6.55pc. But the State Bank reserves fell by $170m during the week to $7.29bn, further pulling the country’s total reserves down to $13.84bn amid regular debt payments.

Market participation improved as average daily traded volume clocked in at 118m shares, up 7pc, while traded value also increased by 14pc to $41m, representing movement in blue-chip stocks.

Foreign selling of equity continued for the 35th week in succession with net outflows of $0.51m, mainly concentrated in banking sector worth $0.14m and technology $0.08m. Meanwhile, most of the buying was witnessed in cement amounting to $0.45m and fertilisers $0.2m. Amongst the local participants, insurance companies turned out to be the biggest sellers of equity worth $14.7m. It was mainly absorbed by mutual funds’ net buying of $13.4m and companies $3.5m.

Sector-wise, the market was mainly driven by commercial banks, adding 244 points, on renewed buying interest while oil and gas exploration sector added 131 points led by 10pc rally in Brent to $57/bbl. On the flip side, sectors that contributed negatively included food and personal care products, decreasing by 53 points, auto assembler 27 points and oil and gas marketing companies 26 points owing to decline in petroleum sales. Fresh drug price notification released by the Drug Regulatory Authority of Pakistan during the end of the week failed to excite investors as pharmaceutical edged lower by 0.1pc.

Major gaining scrips were Bank Al Habib, up 10.53pc, Engro Coporation 5.22pc and Habib Bank 4.29pc, adding 288 points. Other gainers were the major exploration and production stocks: Oil and Gas Development Company, Pakistan Petroleum and Pakistan Oilfields.

Going forward, market gurus pinned hopes on expected visit of the UAE and Saudi Arabia’s crown princes in January and February, respectively, which were thought to yield potential lucrative agreements. Investor interest would be driven by the decision regarding International Monetary Fund programme anticipated during the month.

Market participants would focus on the presentation of a potential mini-budget in order to meet fiscal deficit target. Pakistan’s performance review under Financial Action Task Force is also due from Jan 8-10 in Sydney which could lead to boom or bust in investor sentiments.

Published in Dawn, January 6th, 2019