It was an uncomfortable night for the stock market, as it faced intense pressure on the eve of the Shanghai Cooperation Organisation summit. That’s why the KSE 100 index ended in the red. Political tensions, foreign outflows, and fears about economic reforms weighed on investors to maintain a bearish trend throughout the trading session.
For the last day of trading in a week, the KSE 100 index saw a positive opening and touched an intraday high of 86,105.02. Yet, a broad sell-off on political unrest and uncertain economic scenarios scared away the initial optimism and led to profit-taking. The index closed at 85,261.39, registering a loss of 222.02 points or 0.26%, to be specific.
Ahsan Mehanti of Arif Habib Corporation said political uncertainties and foreign outflows were major culprits behind this downward spiral in the market. “Politics generates noise, and foreign outflows are there,” he said. Investor sentiments were further dented by the protests from the PTI and concerns over instability.
Other factors that affected the market were that the government had made arrangements for the payment of independent power producers (IPP) and pressure from the International Monetary Fund (IMF) to start reforms in agriculture and textiles. Also, there was some delay in the privatization of the state-owned enterprises (SOE), which made the investors hesitant.
The sectors most affected by Monday’s trade were the energy and fertilizer sectors. Among these, Hubco and Engro Fertiliser added much to the fall of the index. The stock of Hubco fell by 9.15% as the early closure of its Power Purchase Agreement with the government was announced. Similarly, shares of the company Engro Fertiliser declined by 4.1% after the earnings report disclosed lower profits compared to earlier expectations.
As the factors revealing weakness in these two companies joined forces with the juggernauts Oil and Gas Development Company, Bank Al-Habib Ltd, and Engro Corporation, as much as 532 points were whisked away from the KSE 100 index. However, positive movements from Fauji Fertiliser, National Bank of Pakistan, Attock Refinery Ltd, and International Steel Ltd added a total of 326 points to the index.
Trades volume decreased sharply, with the average falling by 14.81% to 477.64 million shares traded, with the total value of shares traded down by 10.31% at Rs23.47 billion. Some of the highly traded stocks include WorldCall Telecom, Hub Power, Pakistan Refinery Ltd, Cnergyico PK, and Pakistan International Bulk Terminal Ltd.
Shares of Atlas Honda, Reliance Cotton Spinning Mills Ltd, Sapphire Fibres Ltd, Siemens Pakistan, and Attock Refinery witnessed a huge rise in share prices. On the other hand, firms like Unilever Foods, Nestle Pakistan, Hallmark Co, Bhanero Textile, and Paki Engineering bore heavy losses in terms of their share prices.
Foreign investors were net sellers during the session, having sold shares worth around $3.66 million. Their consistent selling has maintained pressure on the market from the downside. Analysts think that a lack of clarity regarding the government’s economic policy and concerns related to the political climate is forcing foreign investors to play cautiously.
Market analysts have taken a conservative view for the coming period. “While market sentiment remains a bit positive, the prospect of slower activity cannot be ruled out because political uncertainty may arise and profit-taking would continue,” said JS Global analyst Mohammed Waqar Iqbal. He suggested that investors take profits now and await dips in the market before considering further buying opportunities.
Hence, the market’s performance over the coming days will depend mainly on the outcome of the SCO summit and any political activity. The government strategy in terms of IMF-driven reforms and privatization of the SOEs will also go a long way in shaping investor sentiment.
Monday’s trading pattern represents a careful approach by investors regarding deeper concerns over the prevailing political and economic conditions. In the near term, the market could remain bumpy, and it’s a more range-bound kind of movement unless there’s a positive enough trigger.
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