The Pakistan Stock Exchange benchmark index (PSX) remained in the consolidation phase during August 2021 and witnessed a marginal gain of 0.7% or 231 points MoM.

The average daily volume of the KSE-100 index dropped by 13.6% MoM to 127mn shares compared to 147mn shares in the previous month, while value decreased by 16% MoM to PKR 6.6bn. The result season failed to excite the investors despite solid earnings and payouts.

Experts attribute this indecisiveness to rising geopolitical uncertainty surrounding Afghanistan and its possible spillover impact on Pakistan coupled with increasing international commodity prices, which could build pressure on the country’s balance of payment and inflation. Besides these geopolitical and economic concerns, rising COVID cases also portray risk as the positivity ratio remained above 7%.

September outlook

Looking ahead, we hold a neutral view on the stock market primarily due to political turmoil in Afghanistan and its spillover impact on Pakistan and uncertainty related to IMF 6th review of its financial package. However, currency devaluation will bode well for export-oriented industries. At the same time, on the import front, it will increase the cost, cement and steel companies would feel the heat of rising commodity prices and their ability to pass on the impact will be tested going forward, which may set the direction of these sector’s stocks.

Moreover, the MSCI review will also dictate the market sentiment in the future

Courtesy – ‘Spectrum Research