PSX market review for the week

Stocks once again succumbed to profit-taking during the week as investors braced for further increase in economic restrictions amidst worsening third wave of COVID-19. The benchmark index edged down by 444ppts WoW to settle at 44,262 level. The market continued to showcase resistance near the 45,500 mark as the index hit a high and a low of 45,952 and 44,152 points, respectively. On the other hand, traded volumes averaged at 340Mn shares (↑ 2% WoW); whereas traded value clocked-in at USD 119Mn (↑ 23% WoW).

Surge in COVID-19 cases and ongoing rollover week kept the market activity in check: Despite a massive positive opening of 976 points on Monday, the index remained under pressure throughout the rest of the week as COVID cases began to flare up alarmingly. According to NCOC, the positivity rate had surged past 10% with total infections tally crossing the 800,000 mark during the week. Investors feared the repeat of last year as PM Imran Khan hinted for a complete lockdown in virus-hit cities. Additionally, the ongoing rollover week added extra pressure in the market. As of 29th April 2020, the outstanding futures value stood at PKR 14.26Bn compared to PKR 24.8Bn last week. The ongoing result season did little to uplift investor sentiments perhaps due to upcoming long Eid holidays and budget announcement right after Eid.

Energy stocks remained active during the week: The energy sector stayed in limelight due to strong corporate results posted by companies and ECC’s meeting during the week to discuss the release of first instalment of payments to IPPs. International crude prices were also on an uptrend over the week as expected recovery in summer fuel demand outweighed concerns about higher COVID-19 cases in Brazil and India. Oil prices rose to 6-weeks high as Brent and WTI settled at 67.6 and 64.4 BPD, respectively.

Data releases that kept the investors engaged included 1) weekly SBP reserves, which rose by 2.4% WoW to USD 16.4Bn and 2) fiscal deficit number, which marginally narrowed down by 0.61% to PKR 1.6Tn (3.5% of GDP) during 8MFY21. Other important news for the week included the announcement by SBP to launch two new initiatives under Roshan Digital Account (RDA), Roshan Apni Car and Roshan Samaaji Khidmat, which is expected to further increase foreign currency inflows in the country.

Outlook:

Considering the improving macroeconomic prospects and strong value of PKR against USD (↑ 0.2% WoW), we believe that the market will resume its upward trajectory going forward. However, we do expect range-bound activity in the near-term due to conclusion of earnings season, increased COVID-19 related restrictions and upcoming Eid holidays. We recommend investors to view any dip as a buying opportunity. Fertilizers, Autos, Steel, and Cement remain our preferred picks. Key data expected to release next week include the PIB (fixed rate) and T-Bill auction results in which the government plans to raise PKR 625Bn cumulatively.

Courtesy – BMA Capital Management Ltd.

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