Market snaps 4-week winning streak amid mixed developments

KARACHI: Pakistan Stock Exchange (PSX) snapped a four-week winning streak, with the benchmark KSE-100 Index shedding 161.31 points (-0.33 percent) on a week-on-week basis to close at 48,424.4 points, amid political and economic developments.
The benchmark KSE-100 Index surged by 1,508.73 points (+3.2 percent), 1,156.26 points (+2.52 percent), 852.75 points (+1.89 percent) and 861 points (+1.95 percent) in the preceding four weeks. Overall, the index gained 4,217.43 points during the last five weeks. The KSE-100 Index has gained 6,971.42 points since the Staff Level Agreement (SLA) was signed with the International Monetary Fund (IMF) on June 30.
The current week is different from preceding five weeks due to important developments on the political front, as markets do move on political events and uncertain conditions. This week is particularly interesting as the caretaker prime minister has been announced and it is yet to see how the stock market welcomes the caretaker set-up.
The market opened the week on a negative note with the first two sessions closing in the red. The benchmark index declined on Monday ahead of the much-awaited approval of a new refinery policy. Moreover, investors’ concerns mounted over statements of the then federal ministers about a potential delay in holding of the next general election. Bears tightened their stranglehold on Tuesday as the PSX plunged over 950 points over political uncertainty ahead of transition of power to caretaker setup and rupee depreciation against the US dollar, which shattered investor spirits and triggered profit-taking. Furthermore, uncertainty about the release of Rs415 billion for settling the gas sector circular debt kept the market under pressure.
Bulls staged a comeback on Wednesday when investors cheered a favourable trade data, which boosted the positive sentiment and offset the previous day’s losses. Investor sentiment flipped again on Thursday in the absence of positive triggers and the prevailing political and economic instability in the country, fueling bearish trading. Delay in approval of the circular debt management plan by the International Monetary Fund (IMF) kept investors on sidelines.
In a major turnaround on the last day of trading week, the index recovered over 600 points following a highly positive MSCI’s quarterly review of the Frontier Market Index where scores of Pakistani companies were added.
Sector-wise, negative contributions came from technology (157 points), oil exploration and production (116 points), oil marketing companies (87 points), refinery (73 points) and chemical (56 points). Meanwhile, sectors that contributed positively were fertilizer (264 points) and banking (153 points).
Scrip-wise, negative contributors were SYS (92 points), OGDC (77 points), PPL (66 points), PSO (53 points) and TRG (51 points). Meanwhile, scrip-wise positive contributions came from DAWH (181 points), UBL (96 points), ENGRO (93 points), MCB (58 points) and LUCKY (38 points).
According to AKD Securities, the market is expected to remain positive as the new caretaker government and the relations it develops with the IMF are likely to bring stability. “After a significant upside, the market still remains cheap at the forward price-to-earnings multiple of 3.1. Additionally, the influx of investments by the United Arab Emirates and Saudi Arabia will bolster and affirm stability.” – TLTP