Weekly review Jittery investors push PSX in red
Bears regained control of the Pakistan stock market in the outgoing week as looming uncertainty on the political front coupled with rising cases of Covid-19 across the country drove the index back into the negative territory. The benchmark KSE-100 index dropped 634 points or 1.6% to close at 40,164 points.
“Political noise and uptick in Covid-19 cases in the country wiped off most of last week’s gains made at the local bourse this week,” said JS Global analyst Amreen Soorani.
During the week, trading remained under pressure on back of concerns over rising inflationary levels, news flows citing hurdles over continuation of the International Monetary Fund (IMF) Programme, and aggression from the opposition. A sharp rise in the coronavirus cases also sparked fears of another lockdown, which did not bode well with the participants and prompted them to divest their stakes.
Trading kicked off on Monday with a fresh plunge of 588 points after Asia Pacific Group on money laundering placed Pakistan on its enhanced follow-up list while keeping in view technical recommendations from the Financial Action Task Force (FATF). The forthcoming Financial Action Task Force (FATF) meeting, scheduled to take place late in October, continued to weigh on investors’ mind.
Encouraging remittances figures, which depicted inflows staying above $2 billion for the fourth successive month in September 2020, failed to entice market participants to take positive positions in the market.
Furthermore, the rising political noise also deterred the market from posting gains. The Pakistan Democratic Alliance had announced to hold a protest rally at Gujranwala on Friday - a move which escalated political temperature and continued to impact the direction of the market throughout the week.
Fortunately, the downtrend reversed mid-week and the market posted gains on Wednesday following improved investor sentiments on back of recovery in international equity and oil markets. The Pakistani rupee also staged a modest recovery during the week and closed at a five-month high level of 162.49 against a dollar, which triggered an uptrend in the stock market.
However, the optimism could not be sustained and the Pakistan Stock Exchange once again reported losses as participants assumed cautious positions ahead of the PDM’s protest. Investors also took cues from decline in international markets and remained on the sidelines. The final session saw the market surpass expectation and close the week on a positive note aided by brisk buying in cement and banking sector stocks.
“Next week, trading will be dictated by FATF’s plenary session scheduled to take place from October 21 to 23,” stated a report from Arif Habib Limited. “Reappearance of Covid-19 infection ratio to over 2% may also trigger another smart lockdown in big cities.” Average daily volumes clocked-in at 296 million shares (down 29% week-on-week) while average value traded settled at $61 million (up 24% week-on-week).
In terms of sectors, negative contributions came from oil and gas exploration companies (212 points), cement (116 points), power generation and distribution (60 points), oil and gas marketing companies (56 points), and technology and communication (51 points). On the other hand, positive contributions were led chemical (16 points) and commercial banks (10 points).
Scrip-wise, top negative contributors were HUBC (69 points), PPL (68 points) and OGDC (63 points). Foreign selling continued this week clocking-in at $2.7 million compared to a net sell of $7.5 million last week. Selling was witnessed in exploration and production ($2.8 million) and cement ($0.8 million). On the domestic front, major buying was reported by banks / development financial institutions ($7.6 million) and insurance companies ($2.4 million).
Among major highlights of the week were; World Bank to provide $1.15 billion concessional financing for two power projects in K-P, State Bank of Pakistan’s forex reserves fell by over $1 billion in the last four weeks on debt servicing, reaching $11.8 billion, IMF forecast 1% growth in FY21 for Pakistan, remittances increased 31% year-on-year in September 2020, and auto sales grew 18% year-on-year in September 2020.
Published in The Express Tribune, October 18th, 2020.
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