Weekly review: Three-week rally ends as uncertainty mounts

KSE-100 witnesses range-bound trading as investors remain cautiously optimistic

KARACHI:

The Pakistan Stock Exchange (PSX) endured a relatively range-bound week as the winning streak of the past three weeks came to an end. The benchmark index shed 26 points or 0.1% in the outgoing week to settle at 42,504.76.

Trading kicked-off Monday on a somewhat volatile note as the KSE-100 juggled between the red and green zone. However, institutional buying helped stocks recover to close almost flat, albeit in the green zone. Despite the upbeat remittances data, many investors chose to remain on the sidelines.

Overseas Pakistanis sent $2.1 billion in remittances in August 2020, 24.4% higher than August last year.

The range-bound trend continued for the remaining sessions as the index oscillated between the red and green territory.

On Tuesday, the tables turned and despite positive news flow the index retreated 185 points. An improvement in the large-scale manufacturing readings, which jumped 5% year-on-year in July after five successive months of deceleration, also failed to entice investors.

Uncertainty over the Asia Pacific Group (APG) meeting on anti-money laundering measures coupled with a joint session of Parliament on Wednesday for voting on a crucial Financial Action Task Force (FATF)-related bill cast a dark cloud over the domestic bourse, prompting investors to resort to panic selling. In the wake of these developments, selling pressure persisted and dragged the index lower in the following session.

Finally, bulls staged a comeback on Thursday as investors adopted a wait-and-see approach over expectation for a status quo in the upcoming monetary policy announcement by the State Bank of Pakistan, scheduled for Monday (September 21).

Additional support was also lent by recovery in international crude oil prices, which helped bulls maintain control for the following two sessions.

“Investors’ adopted a hibernation policy prior to next week’s monetary policy meeting (marking the end of a three-month interval by the SBP), which kept the volumes dry,” according to an AHL Research report.

Average volumes settled at 537 million shares (down 28% week-on-week). While average traded value clocked-in at $93 million (depicting a decline of 35% week-on-week).

“Sectors such as food and personal care (up 2.7% week-on-week) and engineering (2.3%) outperformed the benchmark index,” stated a JS Research report.

On the flip side, negative contributions came from insurance (down 47 points), commercial banks (38 points), power generation and distribution (37 points), tobacco (28 points), and textile (25 points).

Scrip-wise, positive contributions were led TRG (27 points), PPL (26 points), PAKT (25 points), KAPCO (25 points) and HBL (24 points).

Foreign selling continued this week, clocking-in at $1.7 million compared to a net sell of $4.4 million last week. Selling was witnessed in banks ($2.4 million), though major net buying was witnessed in the cement sector ($1.9 million). On the domestic front, major buying was reported by insurance companies ($10.56 million) followed by mutual funds ($3.56 million).

Among major news of the week was; remittances surged 24% year-on-year in August 2020, Asian Development Bank revised down Pakistan's FY21 growth forecast to 2%, LSM rebounded by 5.02% year-on-year in July 2020, Pakistan managed to get stay over $6 billion penalties in Reko Diq case, and FDI surged 40% in July-August 2020.