Weekly review Bears rule PSX amid global selloff

Index drops 804 points as concerns over second coronavirus wave mount

The Pakistan Stock Exchange (PSX) witnessed another bearish week as spill over effect of faltering global equities battered the local stock market throughout the week. The benchmark index dropped 804 points or 1.9% in the outgoing week amid persistent selling pressure to settle at 41,701.23.

“Primary concerns that kept investor sentiment bearish included a major sell-off witnessed in international markets on the back of rising coronavirus cases internationally, particularly in Europe,” stated AHL report.

The week kicked-off amid high political noise, as the opposition leaders gathered for the All Parties Conference last weekend, thus largely impacting sentiment at the market. On Monday, the stock market limped and closed lower as caution reigned supreme in a sluggish trading session ahead of the monetary policy announcement.

In line with market expectation, Pakistan’s central bank left the key interest rate unchanged at 7% for the next two months in anticipation of an uptick in inflation reading in the short term in the country. The announcement failed to excite investors and the index remained under pressure in the following session.

The resurgence in coronavirus cases raised fears of a second wave and more lockdowns, thus sending equity markets across the globe into a downward spiral. During the week, European stock markets plunged and the region witnessed its biggest wipeout since June at one point in time. Pakistan was not aloof to the turmoil as investor sentiments took a hit amid concerns about fresh pandemic-related lockdowns in Europe.

The news flow did not bode well at the local bourse and prompted investors to divest their holdings. Declining global oil prices also took a toll on the domestic oil sector, which registered modest losses.

The trend reversed on Wednesday and the KSE-100 closed positive owing to upbeat current account data, which saw the country post surplus for a second successive month.

Unfortunately, the momentum could not be sustained and the bears made a comeback for the final two sessions mainly due to continuous decline in global equities coupled with lack of positive triggers to give direction to the market.

In addition, the Competition Commission of Pakistan (CCP) raided the office of All Pakistan Cement Manufacturers Association, which fuelled the decline further.

“So far, Pakistan seems to be far from a second wave of the coronavirus. However, turmoil in international markets may continue to suppress sentiment in the domestic bourse,” AHL added in the report.

Investors chose to stay on the sidelines as average volumes settled at 466 million shares (down 13% week-on-week) while average traded value clocked-in at $82 million (up 11% week-on-week).

In terms of sectors, negative contributions came from oil and gas exploration (down 267 points), commercial banks (180 points), power generation and distribution (81 points), cement (70 points) and technology and communication (61 points). On the flip side, positive contributions came from textile composite (11 points).

Scrip-wise, negative contributions were led by Oil and Gas Development Company (118 points), Pakistan Petroleum (94 points), UBL (75 points), Hubco (73 points) and TRG Pakistan (52 points).

Foreign selling continued this week clocking-in at $10.5 million compared to a net sell of $1.7 million last week.

Selling was witnessed in cement ($6.1 million) and commercial banks ($3.8 million). On the domestic front, major buying was reported by insurance companies ($9.1 million) and companies ($7.0 million).

Among major news of the week was; gas sector circular debt surged to Rs250 billion, IMF sought a further limit on short-term borrowings and exclusivity of K-Electric: Nepra all set to take decisions.

Published in The Express Tribune, September 27^th, 2020.

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