Current downward trend created a self-reinforcing effect on market sentiments with participants following their peers, but earnings surprises next week may encourage them to act on fundamentals to rev up shares, dealers said.
Stocks plummeted over 3.5 percent in the week ended October 13 amid thin turnover on weak economic indicators and political uncertainty, which pushed bulls on the back foot and bears took charge.
Analyst Atif Zafar at JS Global Capital said investors mostly stayed on the sidelines as their shattered confidence failed to find any support with politics and economy continuing to attract attention for all the wrong reasons.
“The army chief voiced his concerns over the deteriorating macroeconomic indicators, while the State Bank of Pakistan (SBP) in its annual report also admitted to pressures on external and fiscal accounts,” Zafar added.
KSE 100-share Index of Pakistan Stock Exchange shed 3.5 percent or 1,465.81 points to close the week at 39,846.78 points. KSE 30-share Index lost 3.9 percent or 827.88 points to end at 20,209.74 points.
Average trading volume for the week clocked in at 146 million shares, up 4.3 percent as K-Electric dominated volumes following a regulator’s decision on multiyear tariffs.
Valuations re-attracted foreign investors and consequently weekly foreign portfolio inflow was recorded at $38.8 million as against an outflow of $9.8 million witnessed during the previous week.
“The outgoing week saw the benchmark KSE 100 crash amid rising pressures on both political and economic fronts,” Adnan Sami, an analyst at Topline Securities said.
Moreover, the World Bank’s warning on external front, a 22 percent year-on surge in trade deficit for July-September and a 20 percent decline in remittances caused rupee to slip 1.5 percent, but the SBP eventually intervened by calling an emergency meeting of exchange companies.
Economic Coordination Committee (ECC) of the cabinet slapped five to 25 percent regulatory duties on up to 250 non-essential items in a bid to rein in current account deficit to $15 billion or five percent of GDP during the current fiscal year.
During the week, engineering sector shed 11 percent and cement sector was down nine percent. Oil marketing companies lost eight percent, power generation contracted seven percent and fertiliser sector slid four percent.
ECC also revised up margins of oil marketing companies (OMCs) and deregulated high speed diesel.
“We believe aggressive market competition will limit OMCs’ ability to materially increase margins,” Elixir Securities said in a report.
Exploration and production and banking sectors fared a little better, but the stocks lost two percent and one percent, respectively.
