Weekly Review: Stock market remained in tight bear

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Observer Report

Islamabad

Bears dominated the stock market during the week ended on July 19 as persistent selling pressure dragged the benchmark index down by 1,214 points or 3.6%, which closed at 32,458.77 points – below the 32,500 mark.
The last week was marred by developments on the political and economic fronts, which kept investors cautious. Monday began on a negative note as the market plunged massively on expectations of further tightening of the monetary policy.
Speculation of a hefty hike and further depreciation of the rupee made the investors wary. On the other hand, a World Bank arbitration court asked Pakistan to pay $5.8 billion in damages to Tethyan Copper Company in the Reko Diq case. This development added pressure to the already weakening equity market.
The KSE-100 index got a brief respite as the index finished marginally higher in the following session. Investors continued to await the monetary policy announcement, however, recovery was seen on the back of attractive valuations in certain sectors. The State Bank of Pakistan (SBP) raised the key interest rate by 100 basis points to 13.25% at a news conference on Friday. Despite positive signals in the monetary policy statement, hinting this may be the final rate hike, the market experienced volatile trading as battered sentiments due to economic uncertainty dragged the index into the negative territory.
However, the upcoming visit of Prime Minister Imran Khan to the US renewed hopes of better trade ties, which helped the index advance into the positive territory.
Any gains the market made were wiped out as the index once again turned bearish on Thursday following arrest of former prime minister Shahid Khaqan Abbasi in the liquefied natural gas (LNG) import case. This development adversely impacted sentiments as market participants opted to offload stocks, driving the index deep into the red.
Tables turned on Friday as upbeat current account data and a surge in foreign exchange reserves led to advancement in the index. The uptrend emerged late in the trading session. Trading activity picked up significantly as volumes jumped 107% week-on-week to 106 million shares while traded value increased 83% to $23 million. In terms of sectors, the negative contribution was led by oil and gas exploration companies (down 227 points), fertiliser plants (174 points), commercial banks (155 points), power generation and distribution companies (109 points) and textile composite firms (82 points).
Stock-wise, the negative contribution came from Pakistan Petroleum Limited (down 120 points), Hubco (69 points), Engro (58 points), Oil and Gas Development Company (54 points) and Pakistan Oilfields (49 points). Foreign buying was witnessed during the week valuing at $6.44 million compared to net buying of $5.91 million last week. Buying was witnessed in cement companies ($3.7 million) and banks ($3.2 million).
On the domestic front, major selling was reported by mutual funds ($19.3 million), however, individuals remained net buyers of $9.9 million. Other major news of the week included increase in fertiliser prices, the government going to further increase power tariff by Rs3.5 per unit, current account deficit narrowing 32% to $13.5 billion in FY19, interest rate rising to 13.25% – the highest in eight years and Fitch saying the IMF bailout would weigh on Pakistan’s growth.