Contrary to expectations, Pakistan Stock Exchange (PSE) remained under heavy selling pressure during the week of re-entry in MSCI Emerging Market Index. The benchmark KSE-100 declined by 4081.57 points or 7.8 percent on week-on-week basis and closed at 48,555.30 points. Trading activities also remained low as average daily trading volumes on ready counter declined by 26.7 percent to 294.84 million shares as compared to previous week average of 401.97 million shares. Average daily trading value however increased by 24.7 percent to Rs 25.18 billion.
Total market capitalisation decreased by Rs 713 billion to Rs 9.696 trillion. Individuals were biggest buyers of equities worth $74.8 million while Foreigners were sellers of $149.5 million during the week as against buying of $6.5 million last week; most of the selling was concentrated in Banks ($65.3 million), Cements ($48.9 million) and Fertiliser ($28.0 million), while foreigners bought $7.1 million of Power.
Leading analyst and CEO of Topline Securities Muhammad Sohail said that the KSE-100 index crashed 4,082 points in the outgoing week as investors accumulated index heavy names ahead of MSCI EM inclusion in the hopes of selling to foreigners at higher rates. However, foreigner participants turned out to remain net sellers throughout the upgrade leaving the local participants high, dry and indebted.
On the sector front; Banks were the worst hit with their capitalisation shrinking 10 percent as HBL, UBL and MCB declined between 13-14 percent eroding 1,154 points; followed by E&P's (down 9.4 percent) as OGDC (down 11.4 percent) and PPL (down 9.4 percent) took away 436 points, Cements contracted 8.7 percent as LUCK (down 14 percent) and DGKC (down 8 percent) dented 443 points, while Fertilisers fell 7 percent lead by ENGRO (down 12 percent) and DAWH (down 7 percent) held back 293 points.
An analyst at AKD Securities said with FY18 budget announcement and Pakistan formal inclusion in MSCI EM index, this week remained immensely eventful. Contrary to expectations, fiscal prudence superseded election year populist measures in Budget FY18 while unexpected tax restructuring on the stock market induced further volatility (flat 15 percent CGT regardless of holding period, enhancement of tax on dividend to 15 percent). On the other hand, transition to MSCI EM index triggered a sell?off on likely rebalancing of portfolios. In this regard, KSE?100 index lost 4082 points (down 7.75 percent) to close the week at 48,555 points, where average daily volumes remained at 294.84 million shares while average traded value soared to its decade high of $240.16 million. MSCI Pakistan EM index large and mid?cap constituents were major losers during the week.
Syed Atif Zafar at JS Global Capital said that Pakistan Stock Exchange re-entered MSCI Emerging Markets (EM) during the outgoing week, however the benchmark KSE-100 index shed 4,082 points (down 7.8 percent) as net foreign investment was much below expectations. On Wednesday (i.e. the day-before Pakistan was re-included), $987 million of foreign portfolio movement was executed, but foreign inflows ($452.5 million) were not enough to match foreign outflows ($534.4 million) resulting in net selling of $81 million on the day. A similar trend was witnessed the next day, with KSE-100 registering the single largest points' drop of 1,811. The six main-board Scripps in the MSCI EM Index took the most hit with LUCK, HBL, MCB, UBL, ENGRO and OGDC declining by an average 13 percent. Adding to MSCI woes was the announcement of the Federal Budget FY18 over the weekend, where increase in taxes on capital gains and dividends dented investors sentiments.
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