Stocks static week-on-week amid budget-related worries

KARACHI: In a rare photo finish, the KSE-100 index ended the week on Friday at 36,694 points, keeping the Pakistan Stock Exchange (PSX) at exactly where it was a week ago.

The bulls took a breather due to several reasons, including the low liquidity because of the futures rollover week. Even the lure of MSCI reclassification decision on June 14 failed to attract investors, who seemed slightly worried over news flow of higher taxation in the upcoming budget.

The average daily traded volume shrank 23pc to 249 million shares, from 325m shares a week ago. Average traded value was down 11pc to Rs10.1bn. K-Electric (KEL) witnessed above average volumes during the week on rumour of a potential sell-off of its majority stake by Abraaj Group.

Foreign investors continued to sell during the week, but the outflow was slower at $3.81m against $6.98m the earlier week. Net foreign selling $6m and $1.9m was seen in banking and cement sectors, while overseas investors picked up stocks in the oil and gas marketing sector amounting to $3m.

The PSX underperformed the region by 2.40pc due to heavy-weight banking sector’s disappointing run amidst unexpected 25bps cut in the policy rate by the SBP.Analyst Raheel Ashraf at JS Global identified food producers (3.8pc increase week-on-week) as the star performers.

Meanwhile, a surge in international crude oil price to $50 a barrel (seven months high) during the week failed to bring any excitement in the oil sector (0.2pc drop week-on-week).

“After reaching new heights the earlier week the market hovered around similar levels in the outgoing week indicating that the investors are vying for opportunistic trades based on sector wise budget chatter,” said analysts at Arif Habib Limited.

They concurred that following the SBP’s decision to cut the interest rate from 6pc to 5.75pc, the banking sector took the brunt of the bears denting the index with 306 points during the week’s trading. News regarding sale of EFoods (51pc on offer) and EFERT (up to 24pc on offer) gained momentum, ultimately Engro garnered the bulls helping the index maintain its current level.

Leaders among the stocks during the outgoing week, according to analysts at AKD Securities included: Hascol gained 7.89pc, PSMC 6.53pc, DAWH 3.43pc, SNGPL 3.22pc and Engro 1.82pc while laggards were: MCB down 8.42pc, MEBL 4.29pc, EPCL 3.45pc, HBL 3.41pc and SSGC 3.25pc.

OUTLOOK: Analysts and market experts forecast sector-wise recommendations from various bodies to drive the market in the upcoming week. Information flow regarding the budget was expected to increase as the scheduled date nears which may increase volatility across the board presenting trading opportunities.

With the MSCI announcement around the corner, close eye should be kept on stocks under review. The KSE-100 is currently trading at price-to-earnings (P/E) ratio of 9.0 times 2016 earnings against Asia Pacific regional average of 14.2 times while offering dividend yield at 5.3pc against 2.5pc offered by the region.