Bears continue their hold

Karachi stocks ended another week on a bearish note with KSE-100 index shedding 0.6 percent to close at 33,672.72 points. Equity analysts at Arif Habib Research attribute the downward trend to volatility in the emerging markets ahead of US FED meeting slated for next week.
Faizan Ahmed of GS Global saw volatility at the bourse because of fears of continued selling by foreign investors, further depreciation of PKR post China currency debacle, volatile oil prices, sector-specific concerns and expectations of selling by local CPPI funds continued to deter fresh buying in the market.
"Concerns over upcoming MPS announcement at the weekend by the SBP also kept fresh buying at bay as investors continued to adopt a 'wait and see' approach with bearish investors liquidating their positions," he said.
During the week which ended on September 11, the average trading turnover decreased by 29 percent to 206 million shares while the value of the stocks traded also depreciated by 26 percent to Rs 9.2 billion.
The foreign portfolio investment recorded net selling of $7.6 million compared to the last week's net buying of $12.9 million. Local mutual funds and companies sold portfolios worth $11.4 million and $10.1 million.
Oil prices, a major driver of KSE-100 index, declined again after what the analysts said the last week's correction. Prices of Brent and Arab Light declined by 1.2 and 4.3 percent to $48.08 a barrel and $46.71 a barrel.
"Results flowing in from major corporations helped curb the downwards flow somewhat, along with expectations from certain corners of a possible rate cut of 50bps in the MPS," said AHL analysts.
The week under review also witnessed some positives including remittances growing 5.4 percent YoY in 2MFY16 to $3.2 billion, foreign reserves rising to $18.6 billion and trade deficit shrinking by eight percent YoY in 2MFY16.
Next week, analysts said a bullish trend would be likely to prevail on Karachi bourse on the back of Saturday's 50 basis points cut in discount rate. Key beneficiaries of monetary easing, they said, would benefit leveraged firms such as ENGRO, EFERT, MLCF and PAEL.
"Even without the cut, we have an overall positive take on the market as key sectors such as cements and fertiliser continue to trade at decent valuations," they said.