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Pakistan stocks likely to remain under pressure next week

Pakistan Stock ExchangeKARACHI: Pakistan Stock Exchange’s benchmark KSE-100 Index continued declining throughout the week, down by 4.36%, amid concerns with regards to the IMF program and its associated measures.

“We expect the market to remain range bound amid economic uncertainty with respect to the nature of the IMF program,” said weekly market analysis report of Arif Habib Limited. “Ongoing political noise in the wake of Shahbaz Sharif’s arrest is also likely to keep investors on the back foot. However we reiterate prevailing attractive valuations can revive positive sentiments.”

The domestic equity market shed 1,708 points during the week with the index closing at 37,430, down by 4.36% in the week.

Foreign selling continued this week clocking-in at US $32.6 million compared to a net sell of US $8.4 million last week.

Bulls rushed in on Tuesday as the government decided to avail an International Monetary Fund (IMF) bailout package which evaporated the uncertainty associated with this approach.

However, optimism could not prevail as investors remained cautious owing to the likelihood of the tough measures that the government is expected to undertake as part of the IMF program, such as further monetary tightening, fiscal consolidation, and depreciation of the currency.

Furthermore, depleting FOREX reserves, rising circular debt and Moody’s warning regarding potential rise in country debt burden in the future set alarm bells ringing for investors.

Elixir Securities’ research team said, “We expect market to remain bearish owing to economic crisis and capital outflows from emerging markets. The latter is likely a result of US interest rate hikes and anticipated global economic slowdown associated with global trade wars.”

The quarterly financial results are not expected to ignite investors’ interest as they are expected to remain dull on average due to waning aggregate demand and rising cost of business with weaker Pakistan rupee.

Sector-wise negative contribution came from Commercial Banks (304 points), Cements (290 points), Fertilizer (212 points), Oil & Gas Marketing Companies (179 points), and Automobile Assemblers (119 points).

Other major news: Azerbaijan offers Pakistan open oil credit facility, Cement sales post 18.9% growth in Sept, Hascol closes LPG plant deal, Quarterly auto sales dismal as buying curbs on non-filers weigh, and government approves $40.66/ton tariff for coal mining project.

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