Stocks snap 5-week rally on profit-taking

KARACHI: The five-weekly winning streak came to an end with the KSE-100 index ceding 225 points (0.55 per cent) and closing at 40,887 as investors took to profit-booking.

Building on the month-long bullish momentum which saw the market gain a splendid 11pc, the outgoing week started on a positive note with index adding another 502 points in the first trading session. Market participants remained upbeat in anticipation of potential financial assistance of $2.5 billion from China to support the depleting foreign exchange reserves.

However, the index sank in the next three sessions of the shortened 4-session week (Tuesday being a holiday). Investors’ enthusiasm in equity trading took a plunge on lack of concrete developments on the International Monetary Fund bailout, generally poor corporate earnings and lack of positive triggers. Participants remained concerned over the economic scenario, particularly the external account and fiscal deficit.

For the third successive week, foreign investors were net buyers as their inflows stood at $12.17 million, from $12.30m in the preceding week. Major foreign buying was witnessed in commercial banks at $4.7m and fertiliser $2.7m. On the local front, mutual funds were the major spoilers as they resorted to net selling of $22.6m, attributed by fund managers to save their ‘capital protected funds’.

Sector-wise, commercial banks, oil and gas exploration and tobacco were the worst performers as they cumulatively wiped off 265 points from the index. Cement scrips remained in the limelight where sector initially rose on softening coal prices while paring back some of the gains on disappointing Jan’19 offtakes. The sector, nonetheless, added 106 points to the Index.

Oil and gas marketing companies contributed 52 points and chemicals 25 points to the index downturn.Scrip wise major losers were Habib Bank, lower by 79 points, United Bank 47 points, Dawood Hercules 41 points, Pakistan Petroleum 41 points and Oil an Gas Development Company 36 points.

Average daily volume rose 10pc to 192m shares while the averaged traded value surged 26pc to $62m. Trading was concentrated mainly in the side-board items.

Key news flows impacting the market during the week included government proposing to waive off Rs200bn under Gas Infrastructure Development Cess settlement mechanism; the finance minister declining to a downward revision of Federal Board of Revenue target; international credit rating agency Standard & Poor’s downgrading Pakistan’s long-term credit rating to ‘B-Negative’ from ‘B’ citing fragile external position and weak growth outlook; and country’s foreign exchange reserves marginally moving up 0.56pc ($83m) to $14.88bn during the week ended Feb 1.Pakistan also entered into $10bn gas pipeline agreement with Russia while State Bank issued directives for investment in Pakistan Banao Certificates.

Going forward, strategists expect the visit of Saudi crown prince on Feb 16 to uncover investment for construction of an oil refinery in Pakistan and other ventures. In addition, Prime Minister Imran Khan is visiting UAE on Feb 10 to attend World Government Summit where he would encourage foreigners to invest in different sectors in Pakistan.

Investors would pin hopes on continued foreign portfolio inflows which could help set market direction. Moreover, the supplementary mini-budget is expected to be approved in the upcoming week. Also as the results season picks up pace, some important companies such as Allied Bank, Cherat and Fauji Cement would unveil financial figures.