Weekly review: Budget uncertainty drives market sentiment

KSE-100 increases 261 points as investors remained cautiously optimistic

​ Our Correspondent June 14, 2020

KARACHI: budgetBulls dominated the Pakistan Stock Exchange (PSX) as the KSE-100 rallied for most part of the week only to fall back in red on the last trading day. The five-day win streak came to an end as investors succumbed to pre-budget jitters, however, the week still ended 261 points up.

Monday staged a modest rally as increase in international crude oil prices combined with a recovery in regional markets triggered stock buying at the local bourse. Investors took cue from the rise and made fresh investment in oil stocks, which lent support to the benchmark index. The following session was marred by volatility as uncertainty among participants kept trading largely range bound, which restricted the market from posting extraordinary gains. The weak sentiment was seen on back of a decline in international oil prices, which fuelled a sell-off in index-heavy oil sector at the PSX.

The market remained optimistic on back of surge in international oil prices by 5% during the week benefitting the E&P sector, expectation of reduction in FED on cement, which rejuvenated investor interest in cement sector and expectation of higher allocation of PSDP, which will increase demand for cement and steel.

The index continued to march upward on Wednesday as it gained over 200 points ahead of the release of Economic Survey 2019-20 and announcement of federal budget this week. The momentum continued in the following session due to pre-budget optimism. The market traded in both directions where some investors resorted to profit-booking while others cherry-picked stocks.

Unfortunately, the tables turned as investors resorted to panic selling on Friday. The index received a battering on Friday ahead of the presentation of federal budget for FY21, while a slump in global crude oil prices and sell-off in world equities also weighed on investors’ sentiment.

Participation picked up pace as average daily volumes jumped 44% to 226 million shares, while traded value for the outgoing week increased 26% to $50 million.

Contribution to the upside was led by commercial banks (up 204 points), cements (92 points), textile composite (64 points), pharmaceuticals (56 points), and fertiliser (55 points). In terms of scrips, major gainers were UBL (up 63 points), LUCK (54 points), MEBL (43 points), BAFL (33 points), and FFC (31 points). Whereas, scrip-wise major losers were HUBC (down 67 points), OGDC (61 points) PPL (49 points), EFUG (20 points) and MARI (13 points).

Foreigners offloaded stocks worth of $7.73 million compared to a net sell of $15.27 million last week. Major selling was witnessed in commercial banks ($3.27 million) and all other sectors ($1.94 million). On the local front, buying was reported by individuals ($5.96 million) followed by mutual funds ($2.11 million).

Among major news of the week was; government launched inquiry into oil crisis, government gave Rs1.15tr in tax break in FY20, despite overall contraction, agriculture sector grew 2.7%, total public debt jumped to 88% of GDP, ADB approved $500 million loan to Pakistan and foreign exchange reserves held by SBP fell $266 million to $10.1 billion.

Published in The Express Tribune, June 14th, 2020.

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