The local bourse has been demonstrating a rather range bound activity over the last two months, with the KSE-100 averaging at the 45K level. The index witnessed a high and low of 45,627ppts and 44,363ppts respectively during the week, to settle at 44,707ppts (↓1.3% WoW). Despite strong corporate earnings announcements, the bearish sentiments prevailed due to concerns over NCOC meeting for stricter lockdown enforcement on account of increasing Covid cases. Furthermore, average trading volumes declined by 10% WoW to settle at 333Mn shares and the trading value also declined by 3% WoW to average at USD 167Mn.
Austere lockdown measures expectation and depreciating rupee kept the investors concerned: The country reported its highest deaths per day (149) since Jun’20 this week. The government voiced its concern and hinted towards the possibility of an uncompromising lockdown implementation in the following weeks which caused investor to consider exiting the market. Moreover, the PKR further weakened against the greenback to decline by 0.74% WoW to close at 153.63/USD.
UAE $2Bn repayment rollover and TLP nationwide protest called off: One of the few positive developments during the week was the announcement of the rollover of Abu Dhabi fund’s $2Bn deposit following a three-day official visit by UAE diplomats. Additionally, TLP called off its nationwide protest on Tuesday after the government accepted its demand to table a resolution in the National Assembly. On the international oil front, the Brent and WTI closed at $65.51 and $61.71 per barrel, down 1.9% and 2.3% WoW, respectively.
Key data releases during the week included: 1) Weekly SBP reserves, which increased by $53Mn to USD 16.04Bn (↓0.4% WoW); 2) Domestic oil production numbers for 3QFY21, which clocked-in at 77,139 barrels of Oil per day (↓6/↑2% YoY/QoQ)); 3) Foreign direct investment for the month of March, which declined by 40% MoM to USD 168Mn; and 4) Import and export numbers for the month of March, which increased by 71/31% YoY to $5.7Bn and $2.7Bn, respectively. T-Bill auction results were also released during the week in which the government raised ~PKR 0.59Trn against immense participation of ~PKR 1.70Tn. Major interest was seen in 6-months bill with participation of nearly PKR 1.07Tn while all bids for the 12 months bill were rejected, indicating investor expectations of hike in interest rates in the medium term.
Outlook: Considering the range bound activity of the local bourse, we expect the market to dip further in the next week as stricter lockdown measures announced today grip the country and alleviate investors’ concern. We recommend investors to view any dip as an opportunity to accumulate scrips in the Fertilizers, Autos, Steel and Cements space.
Courtesy – BMA Capital Management Ltd.