Pakistan equities started off on a positive note but ultimately ended flat at the end of the week at 42,505pts (↓ 26pts, ↓ -0.06% WoW)). Increased volatility during the week was mainly on account of increased leveraged exposure in the market (outstanding futures value of PKR 16.75Bn as at 18th Sep, 2020), and concerns related to a potential second-wave of COVID-19 cases in the country. Overall average traded volumes stood at 537Mn shares (↓28% WoW) and the value traded in USD terms averaged at USD 92Mn (↓35% WoW).
The passage of FATF related bills in the joint parliament session also revived the positive sentiments after two consecutive declines of 203 points and 64 points on Tuesday and Wednesday. Another key highlight of the week was World Bank’s International Center for Settlement of Investment Disputes (ICSID) decision to grant a stay order against the enforcement of penalty amounting to USD 6Bn in the Reqo Diq case. The news fueled optimism in the market towards the end of the week.
Other important news that kept the investors engaged was the surge in oil prices (↑ 12% WoW) due to lower output produced amid hurricane Sally disruptions and the fear of second wave of COVID-19. Active COVID-19 cases in the country currently stand at 6295, with an average of over 500 cases reported daily.
In addition to above, some key data releases such as remittances, FDI and FX reserves kept the positive sentiments alive. Remittances to Pakistan increased by 31% YoY to USD 4.9Bn in July-Aug FY21 whereas Foreign Direct Investments (FDI) showed an improvement of 40% during the first two months of FY21 to reach at USD 226.7Mn. SBP’s net reserves increased by USD 13Mn to reach at a level of USD 12.8Bn.
During the week, sectors such as engineering (↑2% WoW) and chemicals (↑1% WoW) showed a marginal growth whereas refinery (↓3%WoW), insurance (↓3% WoW) and textile (↓2% WoW) lagged behind.
During the week, foreign investors continued to offload their positions as the net sell clocked-in at USD 1.7mn. This selling was mainly absorbed by insurance and mutual funds with inflows of USD10.6mn and USD3.6mn respectively.
Outlook
Moving forward, we monetary policy announcement will keep investors upbeat. Having said that, we maintain our status quo view on the policy rate. Commentary from FATF session is likely to drive sentiments in the upcoming week. However, rollover week may keep a tight lid on the index performance. We continue to prefer Banks, E&Ps, OMCs, and Pharmaceuticals. (BMA Capital Management Ltd.)