Stocks suffer from stimulus deficiency; investors eye data

Stocks are expected to continue reeling under geopolitical tension and lack of triggers after consecutive five weeks of losses, but trade and auto data and IMF clarity might help the market recover some of the losses, dealers said.

The dealers said positive auto sales data in February would cause excitement, while trade data in the coming week might act as a trigger for the market in the following week.

“With result season approaching its end, we expect range-bound activity at the bourse amid lack of triggers and continued geopolitical tension,” brokerage BMA Capital Management said in a weekly review.

The KSE 100-shae benchmark index of Pakistan Stock Exchange kicked off the week on positive footings. However, it failed to sustain the gains and plummeted 1.49 percent or 588 points to close at 38,950 points.

A further contraction was observed in trading activity as the average daily volume was recorded at 84.5 million shares at KSE 100 versus 159.46 million shares. An average volume on all-share index stood at 114.16 million shares.

“During the outgoing week, Pakistan equities declined by 1.5 percent, extending the losing streak to five weeks,” Topline Securities said.

“The investors remained on the sidelines as uncertainty emanating from Indo-Pak confrontation as well as sector specific impact of economic reforms package on heavy weights kept investors unnerved.”

Foreigners were net sellers of $3.5 million as compared to net selling of $1.33 million. Local investor mutual funds were net sellers of $10.6 million.

Worst performers of the week were exploration and production sector and commercial banks as they cumulatively chipped away 357 points.

“Banking sector remained under pressure due to the super tax clause in the economic reforms package,” Topline Securities said in a report.

Auto assemblers, however, added the most points to the index during the week, totaling 91 points, due to the removal of law barring non-tax filers from purchasing cars.

Approval of the second mini-budget with a score of amendments from the national assembly was the key highlight of the week. Relaxation for non-filers warrants spiraling car demand going forward, according to the dealers.

Cement sales numbers released over the weekend highlighted a slowdown in local cement dispatches together with an increase in exports. This, coupled with an austere demand outlook, brought the whole sector under the hammer as it slipped 2.66 percent. Likewise, power sector failed to gain attraction despite a payment of Rs200 billion from the government to ease off the circular debt situation.

Other news that were factored in were Pakistan State Oil receiving Rs60 billion from power sector companies, a proposal to withdraw four percent super tax on banks and China’s $2 billion commitment for construction of houses.

After the approval of the mini-budget and easing tensions at the border, we foresee market reverting to its fundamentals in coming days,” Habib Metro-Finance said. “However, increasing inflationary pressure along with an anticipated deal with IMF (International Monetary Fund) warrant yet another increase in interest rates.”

Arif Habib Limited said investors are likely to take a cautious approach despite reduction of noise from eastern border.

“Conclusion of result season could also keep the market range-bound,” the brokerage added. “We do highlight that any clarity regarding a potential IMF program can be a positive trigger for the index.”

Ismail Iqbal Securities expected market to remain mixed in the upcoming week in the wake of no major catalyst.