The weekly performance of the KSE-100 index was encouraging, up 155 points (+1.3 per cent WoW) despite growing international concerns. Uncertain global economic conditions and deteriorating Pak-US relations failed to cause bearish sentiments as local investors rallied to keep average daily activity at 83m shares (+15 per cent WoW). However, foreign investors came out to be the most significant net sellers with a capital flight of USD 7.3m during the week. Foreign selling comes as expected owing to the troubled EU economies struggling with debt burdens and tight fiscal spaces. Their concerns were also confounded by deteriorating Pak-US ties bordering around the imposition of trade embargos and aid seizures. However, this is not a new happening as relations between the two countries have seen strained times before. Nevertheless, refreshing consensus arising from the All-Parties-Conference acted as a positive boost to local investors which were able to propel the index towards the positive led by companies buying $12m worth of equities. Reduction in the national savings rate to 12 per cent and better than expected trade figures released further provided confidence to investors.
During the week, impressive fertiliser off-take numbers (growth of 84 per cent YoY in August) helped dispell concerns over flood damage and sparked intrest in fertiliser sector stocks. Of these, FATIMA and FFBL were able to attract the largest interest in terms of volume and both registered a positive change. ENGRO witnessed a +6.3 per cent change with most interest being diverted to the stock future, which is closed at a spread of 14.3 per cent above spot rate. A similar situation was witnessed in the future of FFBL reflecting investor interest and expectations regarding healthy earnings, particularly owing to DAP prouction held by the two companies benefiting from rising international DAP prices of the fertiliser. Meanwhile, interest was also seen in the cement sector with LUCK gaining an impressive 3.1 per cent WoW.
The fate of the Pak-US relations, coupled with developments on the global economic front, are expected to drive the attitude of foreign sellers in the coming few days. However, this does not necessarily mean bearish sentiments as local investors have come to the fore induced by high yields and attractive valuations. The move of lowering the National Savings benchmark rate and positive statements from finance officials regarding the prospects of Pakistan’s trade balance help support the notion fiscal easing is on its way. This will be truly correct if the SBP decides to lower the interest rate in its upcoming MPS review in the end of next week. Analyst expectations are hovering around a 50-100bps cut, whichever one would come as a sigh of relief for investors and companies alike.
