KARACHI: The outgoing week proved to be troublesome as the KSE-100 index recorded a steep drop of 1,002 points (2.4 per cent) and settled below the 42,000-level at 41,631.

The decline in global equities over the fear of Chinese corona virus spilled into the local market as well where investors decided to hold on to cash. The decrease in international crude prices at the beginning of the year kept the index-heavy exploration and production stocks under pressure.

The State Bank announcement to keep key interest rate unchanged in the latest monetary policy statement triggered selling in the leveraged sectors such as cement and steel. Concerns over higher than expected reading of inflationary pressures and political uncertainty sparked by coalition partners of the government also kept investors away from the market seen in thin participation on most trading sessions.

Average daily traded volume dropped 1pc to 188 million shares while mean value traded receded 7pc to $46m.

The outcome of Financial Action Task Force in the upcoming review remained uncertain since reports suggested that substantial progress was made to pull the country out of the grey list, but the Economic Minister noted it was premature to speculate on any outcome.

Furthermore, the International Monetary Fund is due to start talks with Pakistan on the second review next week and with tax collection recording sizeable shortfall, traders prayed for a smooth sailing.

Foreigners sold stocks worth $8m compared to a net buy of $4.8m the week before. Outflow was mainly from cement sector at $4.2m followed by textile composite $1.3m. On the domestic front, major buying was reported by individuals, picking up equity of $9.8m and broker proprietary trading $2m. Activity by mutual funds generally remained muted but insurance companies were major sellers.

Going forward, traders said that improvement in the external accounts and the stability in rupee-dollar parity might give comfort to the investors but trading interest may remain dull until the end of talks with the IMF.

Moreover, investors might shrug off the temptation to build fresh portfolio at currently available blue chips at discounted prices until the final verdict of the FATF next month over Pakistan’s status.

Published in Dawn, February 2nd, 2020