Market trumps volatility to breach all time closing high

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Despite multiple moments of intra-week weakness engendered by the United States presidential elections, the benchmark KSE-100 share index remained successful in triggering a volatile yet steady spell of northbound movement.

The market sentiment remained shaky in anticipation during the first two days of the week. However, the equities experienced a knee-jerk reaction during the early hours of Wednesday due to election results, only to recover by day end. The local bourse met with a dip of more than 700 points as election results placed 70-year-old businessman, Donald John Trump as US President-elect.

“The market reacted impulsively mainly because the win was highly unexpected”, said Zeeshan Afzal, Research Head at Insight Securities. “Our market was the first to take the blow as the news came right when the (region) bourse opened on Wednesday.”

However, the analyst added that the local market recovered relatively early with almost all the regional markets still experiencing aftershocks.

Moreover, the last two days of the week were very robust. The market gained 500 points on Thursday and attained an all-time closing high of 42,849 points at week end, with additional feathers in its warrior cap. This was mainly because analysts are optimistic about the US-Pakistan relations and are not expecting much of a policy shift in the near future.

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“The republican’s campaign rhetoric leads us to believe that micromanagement and unilateral actions along Pakistan’s borders may ease out under a Trump presidency,” said a post-election report by AKD Securities.

Silver lining: The benchmark KSE-100 share index has finally learnt to stay above the 42,000 mark despite prevailing volatility due to political tension, be it the recent US elections or the brouhaha over the Panama Papers inquiry.

The benchmark KSE-100 share index gained 1,008 points, up 2.4% from last week’s closing 41,842 points. Foreign selling of $27.5 million was witnessed during the week, but the index still soared on the back of local liquidity.

 

Pakistan’s equity market remained the best performing market during the week in the region followed by China, Vietnam and Singapore with 2.26%, 1.87% and 0.93% gains respectively. Other countries in the region including India, Indonesia, Sri Lanka, Hong Kong and Malaysia closed in red.

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All of the major sectors remained in the gainers’ list over the outgoing week. Top three gainers on the bourse were Cements, Chemicals and Commercial Banks, up 5.5%, 4.3% and 2.4%, respectively.

Al-Ghazi Tractor Limited (+27.62%), Maple Leaf Cement Limited (+14.23%), Sui Southern Gas Company (+8.83%), Fauji Cement Limited (+8.82%) and Fauji Fertilizer Limited (+8.82%) were major gainers during the week.

Meanwhile, laggard stocks included Shell Pakistan Limited (‐3.12%), Karachi Electric (‐2.03%), Hub Power Company Limited (‐1.57%), Oil and Gas Development Company (‐1.47%) and National Bank of Pakistan (‐0.98%).

Banking sector saw net buying of $2.3 million, whereas oil & gas marketing and cement sector had net selling of $5.3 million and $4.6 million, respectively.

Average daily volumes for the outgoing week posted a growth of 2% week-on-week to 494 million shares while average daily value increased 15% over the outgoing week to Rs19 billion or $178 million.

For the week to come, analysts believe political risk still threatens to slow down the rally as Panamagate’s next hearing is scheduled for November 15. However, they expect market to continue its rally led by heavyweight sectors like cements, on the back of strong domestic demand, and banks, on the back of expectations of early interest rate reversal.

The Pakistan Stock Exchange’s market capitalization stood at Rs8.6 trillion ($82.7 billion) at the end of the week.

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