Busy week sees stocks close flat

KARACHI: The stock market closed flat in the outgoing week with the KSE-100 index managing a slight uptick of 25 points (0.08 per cent). It would have shown better results but for the one session on Tuesday when the benchmark plunged by 1,076 points (3.2pc) due to the crash in the US crude futures.

The index erased all the gains on the first day of the trading week which was an extension of the massive rally witnessed the preceding Friday after the State Bank of Pakistan’s surprise rate cut of 200pc. But investors soon got over the excitement as it dawned upon them the adverse impacts on the banks’ net interest margins.

Banks came under the hammer in the later part of the week when the SBP placed a ban on declaration of dividend to shareholders for two quarters ending March 31 and June 30 with a view to let them maintain a healthy flow of cash. The big ones which had already announced dividends were allowed to go ahead with their board’s decisions and compensate for the payouts in the upcoming two quarters.

Investors jumped to buy cement and steel stocks as leveraged companies in both sectors were thought to be major beneficiaries of the interest rate cut. Stocks in the former stayed ahead of others as reports of potential price rise in the Northern region circulated in the market.

On the economic side, the outgoing week turned out to be full of events, starting with the release of $1.39 billion by the International Monetary Fund. Equities attracted investors as the yields in T-bills further fell by 2.18-2.50pc while the rupee appreciated against the dollar.

Yields on government paper stood even lower in the latest auction, which encouraged investors to believe that a further interest was on the cards. Moreover, the current account deficit for March declined 73pc. The incessant foreign selling was a wet blanket on sentiments. Foreign funds continued to ditch equities in the outgoing week and move to safe haven in line with the global trends.

Foreign selling was worth $2.5m, which showed a slowdown in outflows from $14.2m the preceding week. It was recorded in fertilisers amounting to $4.8m and banks $4.1m. On the domestic front, major selling was reported by individuals at $11.7m and broker proprietary account $4.7m. Average volume rose 46.3pc to 261m shares while mean value traded surged 88.5pc to $71m as value buyers accumulated blue chips. The week also witnessed several banks and corporates unveil their financial results.

According to Arif Habib Ltd, sector-wise negative contributions came from i) oil and gas exploration companies at 48.6 points, ii) power generation and distribution 43.8 points, and iii) commercial banks 43.5 points. Whereas gains were led by i) cement 128.2 points, ii) fertiliser 63.9 points, and iii) automobile assemblers 34 points.

Going forward, the state of the lockdown and the upcoming financial results would set the tone for the market. Volumes are likely to remain low due to shortened trading timings in Ramazan and the uncertainty over the pandemic spread. Inflation figures for April would also be released which would help investors form an opinion on the SBP interest rates in the upcoming policy.