August 6, 2019 (MLN): The month of July proved to be no different than the preceding 12 months for bourse, in terms of luck and profit, as benchmark KSE – 100 index lost another 1,963 points (net) to panicky traders, political uncertainty, and apprehension for a variety of reasons ranging rising policy rates, to government’s crackdown plan against tax evaders and depressing economic indicators.

The index closed its last day of the month nearly 6% lower than the prior month which speaks volumes about the pace of its downfall, given that 19% was the loss for the whole prior year against a loss of such magnitude for only one month.

One might think that positive events such as conclusion of IMF programme, transfer of $1 billion under the same and Prime Minister Imran Khan’s visit to the White House would facilitate the recovery to some extent, but they remained as insufficient to draw market sentiments towards the greener side, as ever.

The participants remained more sensitive towards the downside of economic activities including Rupee devaluation, rising interest rates and inflation. Additionally, FBR’s massive drive to enhance tax revenues by rounding up tax evaders added fuel to the fire which brought the benchmark index down from 33,902 points at June end to 31,938 points at July end.

July’s decline marks a six month streak of declining index performance and during this streak, the index has come down by a whopping 9,000 points.

While we’re at it, we noticed that this month’s drop in index is twice the decline observed last year, i.e. in July 2018, when the index toppled by 801 points. The decline back then was 2% compared to its prior month.

This indicates that this year’s market response to budget announcement was much louder.

In July 2019, most of the points were lost within the Power Generation and Distribution sector, E&P, Cement and Commercial Banks which collectively lost over 1000 points within the index. To be specific, losses on the scrips of HUBC (-173) and PPL (-129) accounted for the most points lost during the month. 

During the month, foreign investors observed net buying worth $30.4 million which was inclined towards Cement ($13 million), Power ($6.9 million) and Commercial Banks ($12.4 million) while securities were noticeably withdrawn from Oil & Gas Exploration Companies ($4.3 million).

Alternatively, significant net selling was observed amongst mutual funds ($44.3 million) and local companies ($9.2 million). Mutual funds withdrew securities from sectors all across the board, especially Cement ($8.11 million), Commercial Banks ($7.9 million), Power ($6.7 million) and E&P ($8 million).

Holding a candle to last year’s performance, it is evident that the ongoing fiscal year has started out on the footsteps of the preceding one.

While one hopes against hope for fruitful times ahead, this month’s figures are a headed in a completely different direction as they continue down the trend set in the last many months.

The equity market’s depressing performance in Fiscal Year 2019 is no secret and while discussion on the subject has been exhausted to the point where hardly any aspect is left to mull over, we take one final look back at the index’s track marks to ascertain that the current month is in fact treading on the same tracks.

During FY19, benchmark KSE – 100 index lost over 8,000 points to factors ranging from tension on the Indo-Pak border, to FATF’s unsatisfied remarks on government’s measures to comply with AML/CFT regulations, to anticipation on IMF deal, to inflation, interest rate hikes, expected MSCI downgrades, panic selling, rupee devaluation, and whatnot!

The last 5 months (Feb – June) was when the index took a serious hit after tension on Indo-Pak border escalated. Thereof, the index lost over 6,800 points to a massive sell-off that was stretched across the course of this period.

A SNAPSHOT OF INVESTMENT PATTERN ACROSS SECTORS LAST YEAR:.

During the year, Commercial Banks and Oil & Gas Exploration Companies emerged as the most popular sectors as securities worth $1.5 million and $267.6 thousand (net) were purchased respectively.

The most prominent investors of Commercial Banks were Banks/DFIs ($16.9 million – net), Insurance Companies ($45 million – net), other Local Companies ($42.3 million – net) and Mutual Funds ($13.8 million – net).

On the other hand, each category of investors invested in Oil & Gas Exploration Companies during the year, with the exception of foreign corporates.

Alternatively, the year’s least popular sectors were; Cement with a net sale of $265 thousand, Fertilizer with net sale of $309.9 thousand and Oil & Gas Marketing Companies with a net sale of $296.9 thousand.

Individual investors remained loyal to the cement sector although their investment in the sector reduced by almost half. But what came as a blow to the sector were sell-offs lead by foreign corporates ($40.7 million), mutual funds ($32 million) and foreign individuals ($34.5 thousand) which collectively turned the positive effect of net purchases in their favor.

Meanwhile, the fertilizer sector lost mutual funds and NBFC as investors as their investments from the year before were pulled back. Other than them Individual investors and Bank/DFI also sold noticeable securities of Fertilizer companies.

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