Weekly review: PSX rallies for fifth successive week

Investors cheer declining Covid-19 infections, anticipate lifting of lockdowns completely

KARACHI:

The Pakistan stock market marked its fifth successive week in the green even though the rally lost steam mid-week as investors succumbed to profit-taking. The KSE-100 index posted gains of 276 points to close at 37,608 points in the outgoing week.

Investors had been euphoric over the substantial rate cuts by the central bank and the upcoming monetary policy announcement once again brought equities to the forefront as the preferred asset class. Moreover, the declining trend in Covid-19 infections also spurred investors as hopes of end of lockdown attracted buying interest.

Monday kicked off on a bullish note as participants took cue from last week’s trend and pushed the index higher. Activity was driven by investors cheering the low interest rate environment coupled with a surge in foreign direct investment (FDI). FDI rose 88% to $2.56 billion in Pakistan in the previous fiscal year (FY20) compared to $1.36 billion in FY19, the State Bank of Pakistan (SBP) reported on Friday.

Developments regarding the Diamer-Bhasha Dam and the housing scheme spurred buying interest in cement stocks. Additionally, the news of declining Covid-19 cases and deaths also boosted investor confidence.

The uptrend continued in the following session as encouraging large-scale manufacturing data bolstered investor sentiment and pushed the index upward. A bull-run in global stock markets gave further boost to investor confidence.

Stocks extended the rally on Wednesday as traders indulged in alternative bouts of buying and selling. On the one hand, gains were tempered by anticipation of interest rate announcement, on the other investors cheered the relative stability of the rupee.

Additionally, improvement in the current account deficit also strengthened investors’ sentiments. The current account deficit had contracted by a massive 78% to $2.96 billion in the previous fiscal year. Developments about the Naya Pakistan Housing Scheme also fuelled buying interest in cement stocks.

The tables turned on Thursday as the KSE-100 index snapped the five-day winning streak and succumbed to selling pressure. Market participants resorted to profit-booking on fears of a disappointing corporate results season.

Volatility marred the last trading day of the week on back of economic uncertainty and rising coronavirus. Although the overall mood remained sombre and weak sentiments wiped off some gains made earlier, the index finished in the positive territory.

Participation dipped marginally as average volumes were down 3% week-on-week to settle at 413 million shares, while average value traded dropped 2% to clock-in at $97 million.

In terms of sectors, positive contributions came from commercial banks (253 points), power generation and distribution (76 points), automobile assembler (31 points), textile composite (28 points), and technology and communication (17 points).

On the other hand, negative contributions came from cements (60 points), oil and gas exploration companies (38 points), and chemical (19 points).

Scrip-wise, positive contributions were led by HBL (128 points), MCB (64 points), HUBC (58 points), BAHL (35 points), and MTL (31 points).

Foreign selling continued this week clocking-in at $9.3 million compared to a net sell of $27.4 million last week. Selling was witnessed in commercial banks ($2.9 million) and E&P ($1.7 million). On the domestic front, major buying was reported by companies ($7.3 million) and insurance companies ($7 million).

Among major news of the week were; foreign exchange reserves held by the SBP edged up, LSM declined by 10% YoY during 11MFY20, government considers withdrawing generalised subsidies, two urea plants to start production on July 26 post gas supply resumption and World Bank will extend financing of $500 million and Asian Infrastructure Investment Bank (AIIB) will provide co-financing of $250 million for the RISE programme.

Published in The Express Tribune, July 26^th, 2020.

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