The KSE 100 index has been showcasing range bound behaviour ever since it peaked at the 47,000 level in Feb’21, oscillating in the 43-45K range. The index closed at 44,301ppts (down 2.7%) while witnessing a high and low of 45,450ppts and 44,197ppts during the week, respectively. The bearish sentiments of investors were mainly due to concerns regarding changes in key government ministries and fresh rounds of lockdown on account of increasing covid cases. On the other hand, trading volumes declined by 19% WoW to average at 377Mn shares, while average trading value also declined by 16% WoW to clock-in at USD 133Mn.

Shuffling in key ministries, lockdown imposition dispute and decreased leverage rollover kept the investors concerned: The ruling party’s (PTI) announcement of changes of key personnel in major ministries induced investor concern about the relevant industries long term policies and vision. Secondly, after the centre ruled out imposition of a severe lockdown, the Sindh government proposed a transport ban to curb the flow of the Corona virus from city to city. The total leverage position of PSX also declined from March to April which may have caused additional selling. Further, the introduction of the SBP Bill 2021 was met with hostility, as a general view was that the central bank would not fall under the oversight of the federal government but rather international organizations after bill enactment.

IMF’s $500Mn tranche disbursement and the rising rupee: One of the few positive news that followed the week was the disbursement of $500Mn for budget support from International Monetary Fund (IMF) as a loan tranche under Extended Fund Facility (EFF). Additionally, the Rupee has maintained its upward trajectory against the dollar and reported increase of 1.15% WoW to close at 153.06/USD, which has been the lowest weekly close since July 2019. On the international front, one of the worlds most important trade routes i.e the Suez Canal was finally reopened on Tuesday after the Ever-Given cargo vessel was dislodged. This has had a rather positive impact on global oil supply and eased previous oil shortage concern, resultantly the Brent and WTI closed at $61.24 and $64.65 per barrel, up slightly 0.12% and 0.44% WoW, respectively.

Data releases through the week which kept the market flowing included: 1) Weekly FX reserves, which increased by $378 to USD 20.836Bn; 2) Export number for the month of March, which increased 13.4% MoM to $2.3Bn; 3) Inflation for the month of March, which increased by 0.36% MoM to close at 9.05%; 4) Roshan Digital account inflow for the month of March, which increased by $212Mn to total around $800Mn; 5) Biweekly POL prices for the month of April, which decreased by as much as PKR 3.0, with price of high speed diesel at PKR 113.08/litre; and 6) Foreign investment in PIBs for the month of march, which attracted $103.09m as compared to 37.6Mn in February, taking the total 9MFY21 investment to $240.7Mn.

Outlook: Considering the range bound activity of the local bourse and a mix of positive and negative news flow, we expect the market to gain modestly in the next week to maintain its range bound behaviour. We reiterate Banks, E&Ps, Fertilizers, Autos, Steel and Cements as our preferred picks.

Courtesy – BMA Capital Management Ltd.