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KARACHI: The outgoing week would come to haunt the investors for a long time. It marked the sixth successive week of selling streak that saw the index crash by 1,406 points (3.9 per cent) — biggest loss in six months — to settle at 34,716, a level last seen in May 2016.

The week also featured just 39m shares changing hands on Friday, the lowest single day volume in seven years.

As the investors’ despondency deepened on macroeconomic concerns, the main issue that rattled the market was the uncertainty that shrouds the International Monetary Fund bailout. No firm date of announcement of the package could be announced until Friday when the government asserted that the staff-level negotiations would continue over the weekend. As the IMF deal would be followed by budget FY20, investors generally remained on the sidelines with market holding consensus view of tough conditions tied to the package, which could be loaded on the upcoming budget.

There were talks of piling more burden of taxations, removal of subsidies and increase in electricity and gas tariff. The Fund may also want announcement of 100-200 basis points hike in interest rates in the State Bank monetary policy due at month end.

Investors also feared further devaluation of the rupee. Corporate leaders fret over the adverse impact on companies’ profitability for several quarters ahead. Participants are also holding their breath ahead of the semi-annual index review expected on May 13, where Pakistan faces the danger of being downgraded to frontier market, from emerging.

Average daily volume during the week settled at 73.5m shares, down 30pc over the preceding week, while the traded value clocked in at $23m, lower by 22pc. Part of the reason for depressed volume was the shortened trading hours in Ramzan. Leaders included: K-Electric at 36.9m shares, Maple Leaf Cement 24.4m shares, Sui Northern Gas 16.2m shares and Bank of Punjab 15.7m shares.

Foreign investors continued to swoop on a bleeding market to pick up attractively priced blue chips with net buying of $10.4m compared to net purchases of $4.8m worth shares the earlier week. Inflow was witnessed in commercial banks at $10.9m and cement $1.0m. On the domestic front, mutual funds were major sellers that dumped stocks worth $10.7m, followed by insurance companies selling shares valued at $5.7m.

Sector-wise, bleeding was seen all across the board. Cyclical, such as automobiles lower by 6.3pc, cement 6.3pc and engineering 9.0pc were among the major underperformers given the looming slowdown in economic growth and potential budgetary measures. Banks, down 1.2pc, slightly outperformed the index on expectations of the only sector to benefit from anticipated interest rate hike in the upcoming monetary policy statement.

Among scrips, three main laggards were Engro Corporation, decreasing by 6.84pc, Pakistan Petroleum (PPL) 5.34pc and Searle Company 22.61pc which collectively wiped away 319 points from the index.

Going forward, market direction would be determined by the expected announcement of IMF programme that would provide a clearer picture of the economy. Secondly, MSCI is set to announce semi-annual review on which analysts are divided over the verdict — downgrade to the frontier market or retain in the emerging market with PPL likely to replace MCB. Thirdly, Pakistan would present its progress to the Financial Action Task Force review committee in Colombo aimed at avoiding black list and lifting out of the grey list.

Published in Dawn, May 12th, 2019