Market watch: Stocks dive on political uncertainty

Bears returned to the stock market on Monday as investors offloaded shares in the wake of political uncertainty, which triggered a plunge of nearly 800 points in the KSE-100 index.

With some positive news flow, the market traded in a wide range and moved between intra-day high and low of 595 and 988 points respectively.

Initially, there was some optimism, which was attributed to the success of Prime Minister Imran Khan in securing the vote of confidence from the National Assembly on Saturday.

However, macroeconomic concerns impacted the investment climate negatively and sent investors to the exit door, who dumped stocks to seek shelter.

Rising commodity prices, soaring inflation and widening trade deficit raised concerns about the upcoming monetary policy and economic stability in the country.

Earlier, stock trading began with a spike, however, some of the gains were wiped off till midday. With weak investor sentiment, the decline deepened towards the end of session.

At close, the benchmark KSE-100 index recorded a decrease of 786.29 points, or 1.72%, to settle at 45,051.06 points.

Arif Habib Limited, in its report, stated that in the aftermath of PM’s vote of confidence from parliament, the market endured a heavy drawdown with oscillation of 1,583 points, posting an increase of 595 points in early part of the session and dropping by 988 points in intra-day trading.

Political uncertainty caused by possible change in Punjab’s political setup perturbed investors. At the same time, the recent surge in inflation and increase in international crude oil prices forced investors to think carefully about the upcoming monetary policy and the impact on cyclical stocks.

Resultantly, cement, steel and oil and gas marketing companies saw a major attrition during the trading session.

Over the weekend, the increase in international crude oil prices helped exploration and production sector stocks to stay afloat, however, selling pressure in other stocks put pressure on Oil and Gas Development Company and Pakistan Petroleum Limited as well.

Sectors contributing to the performance included cement (-205 points), banks (-104 points), power (-67 points), auto (-49 points) and pharmaceutical (-46 points).

Individually, stocks that contributed positively to the index were Pakistan Tobacco Company (+10 points), Pakistan Oilfields (+10 points), Azgard Nine (+7 points), Meezan Bank (+3 points) and FrieslandCampina Engro Pakistan (+2 points).

Stocks that contributed negatively were Lucky Cement (-85 points), Hubco (-48 points), HBL (-39 points), DG Khan Cement (-36 points) and Indus Motor (-24 points).

JS Global analyst Maaz Mulla said the Pakistan Stock Exchange kicked off trading on a positive note, touching a high of +595 points on early excitement as the lower house of parliament reaffirmed its confidence in PM Khan with a vote in his favour.

“However, this positivity did not last long as the market came under pressure from likely redemptions in mutual funds, pushing the index down to intra-day low of -988 points. The bourse closed the session at 45,051, down 786 points,” he said.

Volumes improved by 45% to 460 million shares as compared to 317 million shares in the previous session. Azgard Nine (+2.6%), Unity Foods (+3%) and TRG Pakistan (0%) led the volumes with a cumulative 129 million shares changing hands.

“Moving forward, we expect a similar trend to continue amid political uncertainty. Any downside should be viewed as a buying opportunity in cement, refinery and steel sectors,” the analyst said.

Overall trading volumes rose to 459.9 million shares compared with Friday’s tally of 317.2 million. The value of shares traded during the day was Rs24.8 billion.

Shares of 405 companies were traded. At the end of the day, 85 stocks closed higher, 311 declined and nine remained unchanged.

Azgard Nine was the volume leader with 48.2 million shares, gaining Rs0.88 to close at Rs34.83. It was followed by Unity Foods with 45.4 million shares, gaining Rs0.89 to close at Rs30.96 and TRG Pakistan with 35.4 million shares, losing Rs0.03 to close at Rs145.78.

Foreign institutional investors were net buyers of Rs445.7 million worth of shares during the trading session, according to data compiled by the National Clearing Company of Pakistan.