Ukraine invasion roils KSE-100
A turbulent week was witnessed at the Pakistan Stock Exchange as escalation of geopolitical tensions, with Russia launching an invasion into Ukraine, pummeled the bourse. Moreover, spike in global oil price and widening of current account deficit to historic levels struck the trading environment at the stock market.
Throughout the week, international events marred trading at the stock exchange, making the KSE-100 index mimic the movement of global equity markets.
Resultantly, the KSE-100 dived 1,692 points or 3.7% to close at 43,984 level.
“Other concerns such as the Financial Action Task Force’s (FATF) decision together with selling spree during the ongoing roll over week, also kept the index under pressure,” stated a report from Arif Habib Limited.
The week kicked off with a slide and the KSE-100 index descended in the first two sessions. The local bourse dropped alongside global markets that braced for possible military action in Ukraine by Russia.
Moreover, absence of positive triggers to direct the market restrained the index from recording gains.
The announcement of an incentive package for the IT sector by Prime Minister Imran Khan helped the bourse take a breather on Wednesday and erase few of the losses borne in the earlier sessions.
Driving the uptrend, a recovery in global markets restored investor interest and they made fresh buying. Announcement of robust financial results, that were well in line with the market expectations, fuelled the rally further.
Russia launched a full scale attack on neighbouring Ukraine on Thursday and rattled the international stock markets. The local bourse fared no better and plunged over 1,300 as investors adopted a dump-and-run strategy.
A jump in the international oil price to $105 per barrel further pointed towards acceleration of inflationary pressure and hike in local oil prices. This development in particular shattered the spirits of market participants and triggered a sell off at the stock market.
Furthermore, investors feared that the State Bank of Pakistan would tighten the monetary policy to deal with anticipated rise in inflation. A surge in interest rates would further slow down the industrialisation process.
An expansion in current account deficit to historically high level of $2.56 billion in January 2022 dented investor sentiments further and contributed to the sell off.
The final session of the week proved to be a respite for the market as it climbed up owing to stability in the international stock markets coupled with a rout in crude rates.
“Any de-escalation in Russia-Ukraine tensions could propel a rebound in global markets,” said a report from Arif Habib Limited. “Until geopolitical dust settles, we expect range bound activity to prevail in the market.”
During the week under review, average daily traded volume rose 20% week-on-week to 229 million shares while average daily traded value fell 29% week-on-week to $38 million.
In terms of sectors, negative contributions came from technology and communication (342 points), commercial banks (243 points), cement (222 points), oil and gas exploration companies (146 points) and fertiliser (127 points).
On the flipside, sectors which contributed positively were automobile assembler (18 points), real estate investment trust (10 points) and tobacco (9 points).
Scrip-wise negative contributors were TRG Pakistan (201 points), Lucky Cement (133 points), Systems Limited (109 points), HBL (100 points) and Pakistan Petroleum (76 points).
Meanwhile, scrip-wise positive contribution came from UBL (46 points), Millat Tractors (23 points) and Habib Metropolitan Bank (16 points).
Foreign selling continued this week, clocking-in at $3.2 million compared to a net sell of $1.97 million last week. major selling was witnessed in cement ($2.1 million) and technology ($1.7 million).
On the local front, buying was reported by banks ($0.6 million) followed by all other sectors ($0.5 million).
Other major news of the week included looming shortage of high speed diesel, Nepra delaying passing on Rs28 billion extra burden to consumers, Sukuk, IMF package expected to help shore up Pakistan’s economy: Moody’s, Supernet awarding multiple contracts worth over Rs450 million, SEZs proposed on Pak-Iran border.
Published in The Express Tribune, February 27th, 2022.
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