PSX markets review for the week

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Pakistan Equities remained dull throughout the week amidst resurgence in COVID-19 cases and calls for fresh round of lockdowns across the country. Selling pressure on KSE-100 index resulted into 0.40% WoW decline to 40,569pts. Average daily increases in cases have crossed the 1,800 mark, the levels seen during July, with the infection positivity rate exceeding 5%. Investors remained jittery as the National Command and Operations Center (NCOC) recommended cluster-based lockdowns across the country, raising fears of further losses in national output. New guidelines have been issued by the NCOC, which include limiting public gatherings to 500 people and restricting outdoor activities to 10 PM.

During the week, investor participation declined by 21% with average trading volumes clocking-in at 290Mn, while the average traded value fell by 16% WoW and was recorded at USD 66Mn. For the week, foreign investors continued to offload positions as the net sell clocked-in at USD7.4mn. This selling was mainly absorbed by local individuals and banks with inflows of USD7.5mn and USD3.3mn respectively.

Globally, coronavirus infections in US and Europe soared to record levels with daily average cases going past the 100,000 mark. However, the news of Pfizer working on a potential COVID-19 vaccine, with 90% effectiveness in trials, sent global equities surging as Dow Jones index and S&P 500 index were up by 3% and 1% respectively. Following the news, oil prices also jumped up by over 10% to break above the level of USD 40.00/bbl. Taking cues from the international equities, the local index was up by 369 points on Tuesday. However, the vaccine related optimism gradually waned ahead of increasing lockdown restrictions in the country.

E&Ps (↑ 2.5% WoW), Chemicals (↑ 2.3% WoW) and Textiles (↑ 2.3% WoW) remained the top performing sectors during the week while Refineries (↓ 8.6% WoW) and Cements (↓ 4.8% WoW) lagged behind.

In addition to above, the key data released through the week included: 1) SBP reserves, which improved by USD 558Mn to stand at USD 12,741Mn during the week ended November 6th; 2) Remittances, which showed a jump of 14.1% YoY to USD 2.3Bn in Oct’20; 3) large-scale manufacturing numbers, which showed an improvement of 4.8% YoY during 1QFY21; 4) Auto sales numbers, which were up by 13.6% YoY to 194,224 vehicles sold in Oct’20; and 5) provisional hydrocarbon production numbers in which oil showed a decline of 1.8% to 73,273 BPD, whereas gas production improved by 1.7% to 3,208 MMCFD. Apart from this, the major development during the week was continued appreciation of Pak Rupee against the US dollar. Currently, the parity stands at PKR 158.2 which is higher by 4.2% since the start of Oct’20.

Pakistan Investment Bond (PIB) auction was also held during the week in which the government accepted PKR 16.0Bn against a heavy participation of PKR 62.0Bn. Bids for 5-year and 10-year bonds (Fixed rate) were rejected.

Outlook

Considering the rising value of rupee against the Green Back and improving macroeconomic indicators, we expect the market to remain upbeat in the coming week. However, we still advise investors to remain cautious as the second wave of COVID-19 resurfaces and concerns over potential smart lockdown re-emerges. High inflation continues to remain a cause of concern for market participants. Apart from this, PIB (Floating) and T-Bill auctions are scheduled for next week. We continue to prefer Banks, E&Ps, OMCs and Pharmaceuticals.

BMA Research

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