- 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.
