Market Weekly: PSX down by 373 points as investors await economic clarity

  • Foreign investors offloaded equities worth $51.1 million during the week

KARACHI: A host of key financial developments during the outgoing week kept the ‎investors stay away from the Pakistan Stock Exchange. The lack of activity lowered the volumes with the index failing to find ways to ‎score big.

‎The KSE-100 index declined by 0.9 per cent or 373 points to close at 40,496 during the outgoing week ‎where average daily transactions in the bourses declined by 3.1 to 152 million shares on week on week ‎basis.

Foreign investors offloaded equities worth $51.1 million during the week, where most of the ‎selling was concentrated in banks, amounting to $21.5 million, and cement, amounting to $21.1 million. ‎

On the domestic side, insurance and mutual funds provided most liquidity to the market. Most of ‎the foreign selling was concentrated in the last day of the outgoing week, nearly 64 per cent, due to ‎the deadline of the MSCI rebalancing.‎

Among important economic developments past week, the US dollar on Friday shot up suddenly to Rs142 and was traded as high as Rs144 during the ‎day before closing at Rs139 (up 4pc from the previous day). This takes rupee cumulative depreciation to ‎‎26pc during 2018 to-date.

In a press conference held in the latter half of the day, the finance ‎minister attributed the latest round of rupee depreciation to increasing foreign loans, depleting ‎foreign exchange reserves, low exports and artificial cap on the value of dollar in the previous ‎government’s regime. ‎

Meanwhile, the State Bank of Bank of Pakistan raised the policy rate by 150bps to 10pc, which was in line with the expectations reflected by ‎money market yields but higher than the equity market consensus of 100bps.

The decision to raise ‎interest rate was based on inflationary pressures and expectations, relatively lower real interest ‎rates, high twin deficits, and hawkish monetary policies adopted by a developed economy.‎

During the week, Brent crude declined on the back of higher than expected US inventories. As a ‎result, exploration and production (E&P) stocks were down during most part of the week but ‎recovered on Friday after the latest round of rupee depreciation – Oil and Gas Development Company ‎‎(OGDC), Pakistan Petroleum (PPL), Mari Petroleum (MARI) and Pakistan Oilfields (POL) returned 2.6 ‎per cent, 3.4 per cent, 3.6 per cent and 1.1 per cent, respectively while the sector was up 2.8 per cent.‎

An analyst from Habib Metro expects the market to show a mixed trend for upcoming sessions keeping in mind the impact of rupee depreciation. He advised the investors to stay cautious and limit their ‎exposure to stocks that offer a currency hedge and do not carry high leverage.‎

An analyst from BMA Capital Management said that a key development at the end of the last trading ‎day was the announcement of the above-expected policy rate hike by the central bank (up 150bps to ‎‎10pc). “The same is expected to trigger investors’ interest in banking scrips in the upcoming week while ‎leveraged names may face pressure,” he added.

He said a key event to watch out for next week is the meeting of OPEC ‎and like-minded non-OPEC members (Russia), scheduled on Dec 6, where a production cut is ‎expected in order to stabilize the oil market. The same may translate into higher international oil prices and ‎potentially trigger a rally in listed E&P sector, he explained.‎

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