Bearish sentiments prevailed at the Karachi Stock Exchange (KSE) during the last week, ending July 10. During the last week, the benchmark KSE-100 index down by 1 per cent or 344 points (WoW) to close at 35,112 points compared to 35,456 points a week earlier. Market capitalisation posted declined by Rs27 billion to Rs7.575 trillion at the end of the week. An analyst at JS, Raheel Ashraf, said that the week started off on a positive note with the benchmark KSE-100 index making a fresh high of 35,538.
However, political uncertainty and sell-off in oil stocks amid falling international oil prices (at 3-month low) wiped-off early gains.
Hence, the KSE-100 index closed the week down 1pc WoW to at 35,112 points with average trading volumes improving by 6pc WoW to 378 million shares per day, he added. Foreigners remained net sellers worth $22.4m during the week, with crisis in Greece potentially playing on their minds. That said, cement sector continued to outperform others on strong June 2015 dispatches, while insurance stocks (+4pc WoW) also attracted investors' interest during the week.
Sindh government extending Sindh Rangers' special policing powers by one-month, government's decision of reducing 0.6pc withholding tax on banking instruments of non-filers to 0.3pc till September 30, 2015, foreign exchange reserves hitting record $18.7bn mark, Pakistan's missing cotton sowing target by 10pc, banking deposits growing by 10pc YoY in 1H2015 and an increase of 20-80pc in tariff by K-Electric (KEL) for domestic users, were other key highlights of the week, he mentioned.
According to Topline securities, major gain was seen in life insurance (5.0pc), non-life insurance (4.3pc) and cement (3.5pc), while major decline was witnessed in oil & gas (3.9pc) and telecom (3.2pc) during the outgoing week. Among foreign sellers, major net selling during the week was seen in sectors like chemicals ($11.0m), cement ($4.2m) and oil & gas ($3.7m). However, net buying by foreigners was witnessed in banks ($8.6m). Local banks were net sellers of $10.0m during the week, while local mutual funds were net buyers of $17.5m.
Analysts at Arif Habib Limited (AHL) Securities said that selling continued from overseas investors, with Foreign Portfolio Investment registering a net outflow of $22.8m, compared to selling of $1.6m in the last week.
However, foreign selling was more a symptom of regional pressure. Due to disparity in corporate earnings in China and its stock market, negative sentiment persisted in the region.
Furthermore, the Greece factor compounded overall global outlook, causing oil prices to decline by 6pc (Brent) to 9pc WoW (WTI). This naturally had an impact on oil and gas exploration companies, which contributed -ve 206 points (60pc) of the overall drop of 344 points in the KSE-100.
Major news during the week included, steel prices at 13 year-low, due to oversupply, SECP relaxing conditions for companies with 5m shares outstanding, allowing them one year to increase free float to minimum 25pc, and SPI falling 0.17pc for the combined group. Talking about the market outlook, AHL analyst said that a lackluster performance expected next week in the market on account of Eid holidays to follow, however, any correction in the market should be cited as an opportunity to invest in value stocks. Moreover, anticipations are that post Eid market will remain strong on the back of robust profitability and improving macroeconomic fundamentals. Near-term triggers in the market are i) expected rating upgrade by S&P, ii) soft inflation reading to continue in 1HFY16 and pertinently possible discount rate slash of 50bps in the upcoming MPS expected in July '15, though the probability of this happening was thin.