Political turmoil, law and order decadence in Karachi, and the non-disbursement of planned aid were more than enough to keep investors at bay during the course of the week. Lean average daily volumes of 34mn shares traded were observed as the KSE-100 index registered a 0.4% drop WoW closing at the 12,347 level.
The outgoing week saw politically motivated violence grip the financial hub of the country amidst as a spill-over of rifts between dominant parties – PPP and the MQM. The tension heightened following aggressive comments made by a minister against the MQM, peaking on Thursday with businesses preferring to close down early and avoid any potential mishaps.
Even the KSE closed just after midday as investor interest was practically non-existent for the period before. Nevertheless, a retraction of comments and a slight return to normalcy seemed to re-spark lost hustle as volumes, as well as the index, registered a substantial increase on the last trading day. A little positivity can do great even in damaging times.
Stock Specific activity
Investor interest in the market was meager as average volumes were thin despite the respite witnessed on Friday. As per the recently developed trend, stock specific trading was observed. Significant volumes were witnessed in fertilizer stocks with FFBL being the volume leader for the week. Warming up to the Kharif season and the corporate result season, the demand of fertilizers is expected to rise in the current months.
This coupled with the PKR 125/ bag price increase by Engro is likely to benefit fertilizer manufacturers should they – and most probably they will – follow suit. It was no surprise that top fertilizer stocks were also the top performers, while Engro’s share took another week of beating for being the price hike initiator as well its own debt concerns.
Forward Looking Expectations
Owing to the socio-political situation in the metropolis investors have been highly speculative regarding market returns in the near future. The confidence of the business community, stakeholders and investors has been heavily shattered which can bring more bad news for the stock exchange and equity market.
Investor interest has become highly sensitive to negative news flows more so in the aftermath of the situation that engulfed Karachi recently. It is expected that this sensitivity is to remain unless a sustained period of atleast nonvoilence is witnessed. We opine that political noise would be the major driving force behind overall market returns in the coming week.
Moreover, stock specific activity is to continue based on news items relating to the hot issues of today including fertilizers, oil & gas, cement and food items. This is in buildup to the corporate result season which is likely to reintroduce some impetus in the market. The index performance in the upcoming week may be dominated largely by the upcoming results announcement, said Bilal Asif at HMFS, adding that with the results season expected to begin shortly within the next couple of weeks, index performance will remain dependant upon the results revealed.
Hopefully with better results, investor enthusiasm will determine the faith of the benchmark index.
Sector Performance
It was of little surprise that the chemicals sector was the top performer, gaining 2.4 per cent overall as per our value weighted performance methodology. The oil and gas sector continued its upward performance trend. The cement sector was dealt a major jolt owing primarily to the relative underperformance of DGKC.
The textile sector has been facing numerous hardships due to loadshedding, however owing to the increasing chances of the finalisation of a trade agreement with Europe, things might improve in the coming weeks.
