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Capital market records 1.4 pc decline in outgoing week

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LAHORE: The capital market recorded a decline of around 1.4 percent during the outgoing week where banks, cements, oil and exploration and tobacco companies witnessed battering on lack clarity from the government about the package received from China to help support the ailing economy.

The week commenced on a negative note, with 1,000 points being wiped off the market within first two days. This comes on the back of concerns over modalities not being finalized with the Chinese government during Prime Minister Imran Khan’s visit.

Bulls rushed in on Wednesday with Finance Minister Asad Umer asserting that Pakistan has recovered from balance of payments crisis. However, rising inflation and potential increase in interest rates kept the market momentum suppressed.

The equity market shed 615 points or 1.4 percent during the week with the index closing at 41,389.

Sector-wise negative contribution came from Commercial Banks losing 278 points, Oil & Gas Exploration Companies 165 points amid fall in international crude oil prices, Cement 105 points on concern the government would ask companies to regulate prices, however in ECC meeting directives issued to the provincial government to check the price spiral with the dealers, Tobacco 64 points, and v) Oil and Gas Marketing Companies 45 points.

Whereas, positive contributions were led by Fertilizer gaining 102 points and Technology & Communication shares 24 points. The market recorded decline on potential exclusion of select stocks from the MSCI’s EM index looming around the corner led the market to decline.

After financial team arriving from China, Finance Minister Asad Umar and Advisor to Prime Minister on textile and industries announced that soon package will be unfolded which would double exports to China, which helped textile stocks gain investors’ attention. This coupled with export led policies of new government caused blue chips at the sector increasing by one to three percent during the week.

An analyst from Habib Metrofinancial Service expects the market to remain volatile in the near-term due to worsening economic indicators, thereby maintaining our cautious stance and recommending exposure in blue-chip names.

Meanwhile an analyst from BMA Capital Management said that with IMF talks underway, participants are likely to keenly track the developments; the same is expected to play a key role in setting market direction. Among key data points, automobile sales for the month of Oct’18 are expected early next week where any positive surprise may attract investor’s interest in the sector/stock.

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