KARACHI: The euphoria over the stunning rally in the preceding week that saw the KSE-100 index recording gains of a staggering 2,585 points (nine per cent) marking it the best week in 10 years, could not sustain in the outgoing week.

The stocks retraced nearly 62pc of the previous gains with KSE-100 index plunging 1,678 points (5.35pc) and settling below the 30,000 level at 29,672 points.

Incidentally, the benchmark index closed negative for the seventh consecutive month and lost 6.8pc during August which also was the heaviest monthly decline this year.

The placement of Pakistan on the ‘enhanced expedited follow up list’ by the Asia Pacific Group on Aug 23 put a dampener on the investor sentiment, with market closing the first trading session in red.

In addition to that, the potential divestment of the 10pc shares of the Pakistan Petroleum Ltd (PPL) and 7pc shares of the Oil Gas Development Company (OGDC), index heavy weights, built further pressure on the index, stated analysts at AKD Securities. Geo-political tensions also took toll on the market.

The major positive for the week was government’s introduction of presidential ordinance to waive off 50pc of outstanding the Government Infrastructure Development Cess over dues from the CNG, power, fertiliser and industrial gas consumers, while allowing them the option to avail non-cash settlement against outstanding sales tax, subsidy and duty drawback receivable from the government.

The development was mainly positive, especially for fertiliser sector and cushioned the overall market dip. Some other positives were noted as foreign exchange reserves shored up 4pc during the month and sizeable participation in 12-month Treasury bill indicated market expectations of interest rates to have peaked out.

Average daily volumes clocked in at 124 million shares, down 29pc week-on-week while the average value traded stood at 29m down by 23pc WoW. Volume leaders were Lotte Chemical in which 53.63m shares changed hands followed by K-Electric with volume of 34.86m shares, Maple Leaf Cement Factory 29.68m shares, Unity Foods 25.22m shares and OGDC 21.55m shares. Foreign buying was witnessed in commercial banks at $2.0m and technology and communication at $1.0m. On the domestic front, major selling was reported by mutual funds at $13.5mn, while individuals bought stocks worth $8.6m and banks $2.6m.

Sector-wise negative contributions came from oil and gas exploration companies down 519 points, commercial banks 400 points, oil and gas marketing companies 160 points, cement 139 points, and power generation and distribution 216 points. Scrip-wise laggards were OGDC 247 points, PPL 193 points, Habib Bank Ltd 134 points, Bank Al Habib Ltd 79 points and Pakistan State Oil 63 points.

Going forward, the market is likely to be influenced by number of factors. A meeting of the Financial Action Task Force is scheduled to be held in Bangkok on Sept 5 to discuss the progress made by Pakistan against terror financing. The results of the meeting will set the market’s direction.

Investor confidence would also be swayed by the inflation figures for August for they would determine the monetary policy outlook for the latter months, which in turn would impact the market behaviour. Progress on government’s plan to issue Rs200 billion sukuk to address problems of power sector could improve sentiments while the deep discounts of the Pakistani stocks to regional peers provides opportunity to foreign investors to accumulate at current levels.

Published in Dawn, September 1st, 2019