KARACHI: The stock market extended its losing streak for the third week in a row with the benchmark KSE-100 index drifting down by 471 points (1.2 per cent) and close at 40,016 points.

Over the past three weeks, the index has ceded 3pc from the stellar gains of 10pc made in the first month of the year. The week began with celebrations on the visit of the Saudi crown prince over the weekend, and memoranda of understanding (MoUs) amounting to $20 billion were signed during his stay.

Other negatives that pushed index in the red included the ongoing meeting of the Financial Action Task Force (FATF) to review Pakistan’s status; the pressures of roll-over week, lack of concrete development on the passage of the Supplementary Finance Bill through the parliament and mediocre corporate earnings unveiled by two big banks (UBL and HBL) and two Independent Power Producers (Hubco and Kapco)—the latter two surprising the market by skipping dividends. However, some support to index was provided mid-week as the current account deficit for the month of January declined by 48pc month-on-month/54pc year-on-year on the back of sharp reduction in trade deficit.

However, all of that was overshadowed by the investors’ nervousness over the souring Indo-Pak relations in the aftermath of Pulwama attack and the belligerent neighbouring country first revoked the Most Favoured Nation status for Pakistan and latter imposed 200pc regulatory duty on Pakistani exports. Warnings of a befitting response from PM Khan and the GHQ sent investors running to seek the cover of safer fixed return investments.

Foreign investors continued to lap up value stocks for the fifth week in a row. In the outgoing week foreign buying stood at $3.5m, down 71pc over the net inflows of 12.09m the preceding week. Major foreign buying was witnessed in cement stocks worth $3.3m and commercial banks $1.4m.

Power and oil & gas sectors witnessed outflows of $0.8m and $0.5m, respectively. On the local investors’ side, individuals were net sellers of $4.7m and banks were net buyers of $2.6m worth stocks.

Market activity throughout the week remained sluggish with average daily volume for the outgoing week at 105m shares, down 22pc from the earlier week. Likewise traded value declined 14pc to $39m. Stocks leading the volume board were: KEL (31.5m shares), PIBTL (31.4m shares), PAEL (24.2m shares) and Lotchem (22.9m shares).

​Sector-wise power generation and distribution, commercial banks and pharmaceuticals were the worst performers as they collectively wiped off 315 points from the index. Oil & gas exploration was the only sector that offered the index some support as it gained 85 points due to a surge in international oil prices. Scrip-wise major losers were UBL (120 points), HBL (115 points), Hubco (68 points), Kapco (56 points) and SNGPL (37 points).

Going forward, market gurus believe that geopolitical developments, circular debt clearance and passage of the mini-budget through parliament would be major factors that could weigh on investor sentiments.

Market would also keep an eye on Pakistan’s potential entry into an IMF programme. Optimists view the stocks to rebound in the upcoming week given improvement in economy as current account deficit has narrowed down. Further, earnings announcements by some big ticket companies is due in the week ahead including those of Indus Motors; Nishat Mills; Nishat Chunian; Pioneer Cement; DGK Cement; Aisha Steel and Pakistan Petroleum. Positive earnings surprises could help brighten the market mood.

Published in Dawn, February 24th, 2019