Stocks flip-flop in week as political risks weigh

Equities flip-flopped through the week as political uncertainties kept the trade on a tight leash in the first half, but investors’ appetite for risk bounced back towards the latter part of the week, dealers said on Saturday. 

“Asset values at KSE-100 share index remained volatile during the first half of the week with hefty sell-offs amidst crackdown of regulatory watchdog Securities and Exchange Commission of Pakistan (SECP) on some brokerage houses, which were allegedly involved in misuse of in-house financing, fraud and deceptive business practices,” said Faizan Ahmed, an analysts at JS Global in a report.  “The market eventually recovered after progress and developments on in-housing financing product.” 

The benchmark KSE-100 shares index of Pakistan Stock Exchange (PSX) gained 1.25 percent or 615.81 points to close the week at 49,623.81 points, whereas KSE-30 shares index closed higher by 1.28 percent or 339.79 points to end at 26,932.02 points. 

Average trading volume further declined 6.6 percent during the week to 301 million shares a day, while foreigners remained net sellers during the week, offloading $32.7 million worth of shares.  An analyst at BIPL Securities said bearish momentum from last week continued in the first two trading sessions because of selling pressure amid political noise.  Habid Bank Limited (HBL), up 4.6 percent, emerged as the driving force in recovery, adding 160.6 points to the index as investors cheered over a robust loan growth the bank reported in its annual 2016 financial results. Contribution also came in from Sui Northern Gas Pipeline (SNGPL), up 9.9 percent, and Millat Tractors (MTL), up 8.8 percent, contributing 51.5 and 48.1 points respectively with the former rallying over news of upgradation of pipeline infrastructure and the latter coming under the spotlight over anticipation of robust monthly sales. The main index draggers, on the other hand, were Nestle, down 4.6 percent, and Pakistan Petroleum (PPL), down 2.2 percent, eroding 38.8 and 36.5 points respectively. During the week, Bestway cement shared its plan to set up 6,000 tons of clinker per day brown-field cement plant at its Farooqia site in Khyber Pakhtunkhwa Province. Also, SNGPL announced that it will lay second RLNG pipeline from Karachi to Lahore at a cost of Rs110.51 billion.  On the macro front, services trade deficit widened by 30 percent during seven months largely contributed by pending Coalition Support Fund (CSF) inflows. Consumer Price Index (CPI) for the month of February 2017 rose by 4.22 percent, while Pakistan’s non-textile exports fell 6.0 percent to $4.46 billion in seven months. 

Moving forward, analysts expect any verdict announced by the Supreme Court on Panamagate scandal will help shape investor sentiment and set the direction of the market. As military operation continues, any disruption on the law and order front can also put a dent on the index.