Karachi stocks sail in choppy waters

Karachi stocks may continue sailing in choppy waters as foreign portfolio investors are likely to continue to settle their positions in the week ahead that would put weight on the benchmark index, analysts said. Analysts expect the market to remain range bound and foreign selling continues to dictate local sentiments.
Investors continued to have inhibitions in taking long positions, mainly due to bad experiences of the past few weeks.
“Continuous foreign selling coupled with decline in oil prices weighed heavily on the market,” said analyst Fahad Qasim at Topline Securities.
The KSE 100-share Index shed 281.97 points, or 0.82 percent to close the week at 34,144.78 points. KSE 30-share Index fell 347.73 points, or 1.69 percent, to end at 20,207.15 points.
Average daily volumes lost 0.9 percent to 185 million shares a day, while foreigners continued to settle their positions with net selling of $5.7 million as against net outflow of $10.3 million in the preceding week.
A KASB Securities report said the market was choppy due to fluctuation in the exchange rate and suspension of five individual investors’ accounts because of the irregular practices by the Securities and Exchange Commission of Pakistan.
The International Monetary Fund’s (IMF) comments, in its ninth review, on the exchange rate position also affected the sentiments.
The real effective exchange rate should be overvalued up to five to 20 percent, said the IMF staff, though later it sent a clarification.
Earlier during the week, the National Assembly passed the long-awaited SBP (State Bank of Pakistan) Amendment Bill, which will now be enacted after signing by the President, a key structural benchmark under the IMF loan program.
October trade deficit narrowed four percent. Remittances dipped slightly to $1.5 billion compared to a high of $1.77 billion in September.
The MSCI semi annual review turned out to be a neutral event for Pakistani markets.
There was no update on Pakistan’s potential upgrade to emerging markets, while three Pakistani companies were added in the MSCI FM small cap index.
The week saw a bunch of positive news, with Moody’s lifting the outlook for the Pakistan’s banking system from negative to stable, reflecting the improvement in the country’s economic growth prospects.
Additionally, the Oil and Gas Regulatory Authority finally implemented the increase in unaccounted for gas benchmark for gas utilities to over seven percent from 4.5 percent because of continuously increasing gas losses.
The World Bank approved $500 million budgetary support to Pakistan specifically for reforms in the energy sector.
“The approval is a vote of confidence by the World Bank in the reforms being carried out by the incumbent government to resolve the country’s energy crisis,” Qasim said.
Moreover, government is planning to purchase Ijara Sukuk worth Rs215 billion from Islamic banks on deferred payment basis for one year.
In order to facilitate liquidity management in the Islamic banking industry, government will sell these Sukuks on ready payment basis through a uniform price-based competitive bidding auction.