Investors' mood remained defensive during outgoing week

The highlight of the week was a sharp down-move in international crude.

KARACHI (Dunya News) - The mood of the investors was quite defensive and the index witnessed a decline of almost 2 percent with average daily volume dipped by 26 percent because of the deadlock between the government and IMF over the loan package, IMF remarks on slowing country’s economy and rise in benchmark interest rate.

IMF talks stalled owing to disagreements over the terms of bailout package. The government has extended talks with the IMF and it is expected final talks will be held in January to shape out some loan package to help assist the ailing economy. Finance Minister Asad Umar said that the government will not sign the agreement with IMF under pressure and was not in a hurry for the package as alternative arrangements have been made to address immediate economic needs.

However, the alternative arrangement which arrived in the shape of $1 billion from Saudi Arabia increasing the foreign exchange reserves to 8.3 billion dollars. This was the first time in 13 weeks that reserves have increased week on week basis.

During the week, foreigners were net sellers amounting to $11.6 million as against $24.1 million in the previous week this is their 29th consecutive-week of selling. While on local front, Insurance and banks were net buyers of $12 million cumulatively. Average daily turnover clocked in at 157 million shares down 26 percent compared with previous week where due to lack of triggers, market closed the week down 791 points or 1.9 percent to close at 40,869 points.

The highlight of the week was a sharp down-move in international crude which was closely mimicked by local E&P plays as they pared values amidst sizeable selling pressure. This non-stop decline in international oil prices continued to negatively impact E&P’s as they cost the index 329 points for the week, the worst amongst all sectors. Banks contributed 35% (279pts) to the decline in Benchmark Index mainly led by selling in United Bank Limited (UBL) and Habib Bank Limited (HBL). UBL was down 2.4 percent last week due to its intimation of voluntary liquidation of New York branch in view of commercial viability.

“We expect rates to be jacked up by 100 basis points, while any increase of a greater quantum can trigger another wave of selling in the near term”, an analyst from Habib MetroFinance Securities said. Dearth of near term triggers and delay in clarity on the next IMF program will keep sentiments toned down.

Same Securities said index likely to broadly consolidate at current levels, while fresh triggers may be absent until the turn of the year, while foreign selling and local macroeconomic landscape will remain in focus

An analyst from BMA Capital Management said with the with conclusion of IMF talks, focus of market participants is likely to shift to monetary policy set to be announced by the end of next week. We expect the central bank to raise policy rate by 100bps to 9.5%. Rate hike above expectations may rejuvenate investors’ interest in select banks. Amid lack of triggers we maintain our liking for defensive, currency and interest hedged sectors. 

Details by Haris Zamir