Pakistan equities decline during the weel

KSE-100 sheds 0.66 percent; analysts predict profit-taking coming week

KARACHI: Trading at Pakistan Stock Exchange (PSX) this week commenced on a negative note, partly carried from the previous week as investors were doubtful about the success of the Prime minister’s visit to China and another round of negotiations between officials of both countries which did not yield any tangible positive outcome yet. In addition to this, MSCI reduced Pakistan’s weight to 0.046 percent after down gradating Lucky Cement (LUCKY) and United Bank Limited (UBL) from main index to small index and deleted Honda Cars (HCAR) and Maple Leaf Cement (MLCF) from small index. “However, the index rebound post MSCI announcement on last two trading days due to locals showing interest which pushed the index upwards,” an analyst at Arif Habib Limited said. Pakistan Stock Exchange (PSX) benchmark index KSE-100 rose by 0.66 percent or 272 points to close at 41,661 points for the week ended November 16, 2018. Average daily value traded improved by 2.1 percent to $72 million worth of shares/day, however average daily volume traded declined by 8.5 percent to 214 million shares/day. During the week, Brent Crude declined by 3.3 percent and is currently trading at $67.7/bbl. The decline came on the back of United States of America (USA) granting waivers to eight countries on oil imports from Iran. Moreover, anticipation of smooth oil supply from OPEC and Russia further brought the commodity lower. “A decline in oil prices bodes well for Pakistan where the annual energy import bill is almost as high as the entire Current Account Deficit (CAD). Our sensitivity analysis suggests that every $5.0/bbl decline in oil prices reduces Pakistan’s annual Current Account Deficit (CAD) by $800 million,” an analyst at Elixir Securities said. Foreign selling continued this week clocking-in at $24.1 million compared to a net sell of $9.4 million last week. Selling was witnessed in cement ($9.1 million) and commercial banks ($8.3 million). On the domestic front, major buying was reported by companies ($9.9 million) and mutual funds ($4.7 million). The last two weeks can largely be termed as consolidation, which was much needed post a sharp rally of 15 percent from mid-October. Sustainability of the momentum will now largely depend on the conditions laid down by IMF for the economic managers of the country. So far, the news flow emerging out of the ongoing IMF Staff Delegation meetings continues to hint towards the need for increased taxation, further hikes in energy tariffs, privatization of state owned enterprises and reduction in inefficiencies from the energy chain. Amidst this backdrop, analysts feel some profit-taking can be seen over the coming weeks.
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