Political cacophony unnerves investors

KARACHI: The outgoing week brought devastation for stock investors, with the KSE-100 index plunging by 1,589 points (3.4 per cent) to close at 45,288.

The trading volume remained thin as participants were cautious because of continued political uncertainty.

Even the ongoing result season failed to boost sentiments. Arif Habib Ltd attributed the adverse performance during the week to investors’ nervousness over the political show of strength, heavy foreign selling and unimpressive economic data, such as a widening trade deficit and declining foreign exchange reserves.

Topline Securities stated that investors booked gains in the outgoing week after rising 2.1pc in the earlier week. Political theatre drew the masses again as ousted premier Nawaz Sharif’s cavalcade drove from Islamabad to Lahore with leaders of his rival party also breathing fire.

The average trading volume dipped 46pc to 190 million shares. Major trading was witnessed in retail favourites led by Azgard Nine, TRG Pakistan and K-Electric. The average traded value declined 42pc to Rs9.6 billion.

Foreigners sold equities worth $31.2m during the week. Foreign selling was concentrated in oil marketing companies ($8.5m), banks ($6.7m), exploration and production companies ($6.3m) and cements ($4.3m).

The foreign sell-off was absorbed by insurance companies that bought shares valuing $7.4m followed by mutual funds ($6.5m).

According to Arif Habib Ltd, commercial banks took away 336 points from the index, followed by fertilisers 251 points, cements 238 points, oil and gas exploration companies 185 points, and power generation and distribution companies 104 points.

Topline Research calculated sector-wise index erosion, with engineering going down 7pc, fertiliser 5pc, cement 4pc, power 4pc, exploration and production 3pc, banking 3pc, auto 3pc and oil marketing 2pc.

AKD Securities stated that performance-wise, three scrips managed to close the week on a positive note: Pakistan State Oil (4.88pc), Indus Motor (1.79pc) and Bank Alfalah (0.07pc). Laggards included Maple Leaf Cement (14.67pc), Engro Foods (12.08pc), Pak Suzuki (11.44pc), Engro Corp (7.44pc) and Fauji Fertiliser Bin Qasim (6.57pc).

Outlook: Investors continue to await clarity on the political scenario. Ongoing foreign selling due to the expected rupee depreciation may also keep the market under pressure.

“We anticipate the volume to remain weak,” Elixir Securities stated. The brokerage added that important financial results in the next week include International Industries, Hub Power Company, Bank Alfalah and Engro Corporation.

Arif Habib Ltd had a mixed view as a political party will start protests from Aug 16, which can keep the market jittery.

AKD Securities wrote in its weekly report that the ongoing show of strength by various political parties was expected to hurt investor confidence. Individual scrips, such as International Steels, Shell Pakistan, Hub Power Com­pany, Allied Bank, Bank Alfalah and Engro Corp, ought to be wat­ched as they will announce their financial results next week, it said.

Moreover, looming concerns about the rupee depreciation can divert investors’ attention towards sectors that may benefit from the move, such as textile, exploration and production and power.

Published in Dawn, August 13th, 2017

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