Bears rule the roost

Karachi stocks followed the suit as bourses across the globe traded last week in a sharp corrective mode. KSE-100 index closed the week, which ended on August 21, on a bearish note losing 3.9 percent to stand, Week-on-Week, at 34,520 points. In a week dominated by global news, with all major capital markets undergoing sharp corrections, the KSE-100 index exhibited a similar trend, said analysts at Arif Habib Research.
Other drags on the benchmark index included continued foreign selling and declining international crude oil prices that reflected adversely on index heavyweight oil and gas scrips on Karachi stocks market.
The trading turnover averaged daily 14 percent down on 287 million with prices of the stocks traded also showing a negative trend by contracting three percent to $11.8 billion.
The week under review saw offshore investors staying risk-averse as they sold net portfolios worth $43.5 million compared their $0.92 million net buying in preceding week.
Oil prices continued to be a source of major concern, with the latest news of growing US stockpiles following last week's Yuan devaluation news from China, the market observers said.
As a result, they said, the international benchmark Brent crude dipped 5.6 percent, WoW, to $ 44 a barrel.
This made oil and gas exploration firms lead the rut. The index heavyweight sector contributed 350 points to KSE-100 index.
The country's current account deficit narrowed down by 44 percent month-on-month to $159 million, which is a negligible 0.6 percent of the country's gross domestic product. This, analysts cited, as the week's only positive development for equity market.
Other major news included (i) FDI up 307% YoY, (ii) higher than expected result of KEL due to tax factor, (iii) banking results were in line with expectations, and (iv) LOTCHEM posted quarterly profits due to improved margins.
With the rollover phase to commence next week, we expect a bearish overhang to the market, with more positive sentiment to prevail towards the final trading days following the settlement of positions by investors.
Furthermore, there are expectations of reductions in POL prices from 1st September due to the international oil price decline, which could exert downwards pressure on the CPI and ultimately heighten chances of a rate cut by SBP in 1HFY15.