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Weekly KSE: Economic headwinds drag the KSE-100 index below 47,000.

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Weekly KSE: Economic headwinds drag the KSE-100 index below 47,000.
  • The benchmark KSE-100 index fell 179 points to 46,957.47.
  • Lack of triggers, economic uncertainty, and foreign selling cause the drop.
  • Investors remain wary ahead of MPC and MSCI’s PSX decisions.

KARACHI: The Pakistan Stock Exchange (PSX) had high volatility last week, with the KSE-100 index dropping 179 points to 46,957.47.

The bulk of investors stayed away from the market as domestic politics and the economy continued to make headlines for all the wrong reasons. During the previous week, all index-heavy sectors were hit.

Lack of triggers amid rising economic and political tensions, uneven business performance, and increasing foreign selling were the main reasons of the index’s decline.

On Monday, the local marketplace reacted positively to the rise in worldwide crude oil prices owing to storm IDA, which boosted the oil and gas chain, especially exploration and production stocks.

Moreover, a slew of financial results fueled the rise, particularly in the electricity sector, where Hubco benefited from strong dividends.

On Tuesday, the market rose again, witnessed by positive financial results. With the Pakistan Democratic Movement (PDM) organising demonstrations throughout the country, investors remained wary.

Surrounded with uncertainty about the economy, investors showed little lack on Wednesday. The rupee’s devaluation against the dollar and considerable volatility in the global oil markets tempered the early optimism.

The Pakistan Bureau of Statistics published 8.4% inflation figures for August, which failed to excite market players.

The trade imbalance grew 133 percent in August to $4.05 billion from $1.74 billion in the same time last year, keeping the bears in charge on Thursday. Panicked investors tended to dump and flee.

Surprisingly, the benchmark KSE-100 index reversed its downward trend on Friday, posting modest gains.

During the previous week, the Pakistani rupee hit a 13-month low of Rs166.98 versus the US dollar.

Market participants were particularly worried about a decision by Morgan Stanley Capital International (MSCI) due next week. In June, MSCI recommended downgrading the PSX to its Frontier Markets (FM) Index in November 2021 from its Emerging Markets (EM) Index.

Investors waited with bated breath for the Monetary Policy Committee (MPC) to announce the policy rate for the following two months on September 20.

Foreign selling resumed this week, closing at $5.9 million, compared to the previous week’s $5.4 million. Banks ($4.3 million), cement ($1.3 million), and exploration and production ($0.8 million) all sold.

Individuals ($5.1 million) and insurance firms ($4.0 million) made major purchases in the US.

The average volume was 462 million shares (up 20% week-on-week), while the average value moved was $83 million (up by 5 percent week-on-week).

Major winners and losses

One sector that underperformed was oil and gas marketing firms, which fell by 20%. (-19 points). The sectors that did well were technology and communication (+176), electricity generation and distribution (+77), and refinery (+51).

Aside from HBL, major scrip losers were Meezan Bank, UBL, MCB, and Maple Leaf Cement (-24 points). Major gainers were Systems Limited (+141 points), Hubco (+82 points), and TRG Pakistan (+33 points).

Week Ahead

According to Arif Habib Limited, the market may remain range-bound next week. «Important recent tax figures for July-August (23 percent higher than goal) may indicate some good development, particularly on the back of impressive recent tax numbers for July-August,» it added.

In the study, recommended stocks include Engro Polymer and Chemical, pakistan State Oil, Oil and Gas Development Company (Hubco), Meezan Bank, Fauji Fertiliser, Lucky Cement, Engro Corporation (UBL), and Nishat Mills.

“The benchmark KSE-100 index is presently trading at a PER of 5.9x (2021) against the Asia Pacific regional average of 14.5x, while providing a dividend yield of 7.0 percent versus 2.2 percent.

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