Pakistan’s equity market witnesses a volatile week

KARACHI: Pakistan equities experienced a volatile week ended November 09, 2018 as investors were left disappointed by the results of Prime Minister Imran Khan’s visit to China, particularly by no announcement being made detailing the amount of any immediate funding being received or to be received.
Moreover, potential exclusion of select stocks from the (Morgan Stanley Composite Index) MSCI’s Emerging Markets (EM) index looming around the corner led the market to decline.
After three consecutive weeks of Bull Run, Pakistan Stock Exchange (PSX) benchmark index KSE-100 lost 1.5 percent or 615 points closing at 41,389 point level.
Moreover, unexpectedly high consumer price index (CPI) inflation clocking in at 7.0 percent during October 2018 entrenched expectations of more aggressive interest rate hikes ahead.
Market activity slowed down as average daily traded value and volume declined by 28 percent and 25 percent to $71 million and 233 million shares/day.
Foreign investors continued their selling with net outflow of $9.4 million. On domestic front, brokers and mutual funds remained net sellers with outflow of $2.4 million and $0.4 million, respectively.
Pakistan’s delegation is currently holding talks with Chinese Officials in Beijing for a possible economic package where the Finance Minister Asad Umar stated that China agreed in principal to extend its financial support to Pakistan.
In separate developments, IMF delegation started meeting during the week with Pakistani government officials where they showed concerns over China Pakistan Economic Corridor (CPEC) energy deals.
Analysts believe investors will keep a close eye on ongoing negotiations between the Government of Pakistan and IMF delegation visiting Pakistan. While the Saudi Package and potential loans from China have eased off the immediate funding requirements from IMF, analysts predict additional monetary tightening and an inevitable economic slowdown.
Coming week will also witness the announcement of MSCI Semi-Annual Index Review on November 13, 2018, where analysts expect downgrade of Lucky Cement (LUCK) from the Emerging Market Index to Small Cap Index while United Bank Limited (UBL) remains a borderline case.

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