Today's market behavior was typical of a certain group of investors taking new positions in reaction to a strong market surge, while another section of investors seized the opportunity to exit. The PSX opened in the green, with the KSE100 Index gaining over 400 points intraday, but closed in the red, losing some nominal points. Who bought and who sold paints an interesting picture.
The main driver of the recent market surge, foreign corporates, were almost absent from the market. They were replaced by overseas Pakistanis and local mutual funds.
Today, 'Overseas Pakistanis' were net buyers of close to $1.2 million at PSX. Despite the KSE100 ending the day down around 70 points after having opened in the green. Normally, ‘overseas Pakistanis’ activity is not significant, and most of the time they are net sellers. Year to date, they are still net sellers, with a cumulative net sale of close to $3.9 million. However, such is the momentum created by 'foreign corporates' that it has forced overseas Pakistanis to enter the market, creating its own raison d'être.
As I mentioned earlier, 'Individuals' and 'local mutual funds' are captive investors and must enter the market on its strong upward momentum, with mutual funds being more compelled to do so than individuals.
Today, for the second day in a row, mutual funds were net buyers at PSX. It is their structure that compels them to act in a certain way. Unlike other market participants, mutual funds have less flexibility and must adhere to their investment mandates, hence their consistent buying behavior during periods of market strength.
'Individuals' today were net sellers of $1.2 million, followed by 'Companies' with a net selling of $0.92 million and 'Brokers Proprietary Accounts' with a net selling of $0.66 million.
Local investors are torn between monitoring the robust foreign buying spree and anticipating the forthcoming monetary policy meeting, where rates are projected to remain at their elevated levels, leaving them in a state of perplexity.
Recently, insurance companies have been real ‘opportunistic’ investors at PSX. This month, as ‘foreign’ investment surged and the KSE100 Index gained over 4300 points or +6.5%, insurance companies have reduced their cumulative net buying for the current year by 31.6%.
