After closing positively for seven consecutive weeks, the benchmark index of Pakistan Stock Exchange (PSX) closed in red due to political pressures for the week ended 20th December 2019. The market started off on a strong note with the index gaining 728 points on Monday, with the rally driven by main-board stocks particularly the E&P sector. However, profit-taking and negative news flow on the political front dented market sentiments with the benchmark index closing flat at 40,833 points, down 0.2%WoW. OGRA’s proposal for a hike in gas prices by 31.6% for general industries impacted the market performance. Amongst listed sectors, the highest rate hike of 136% has been proposed for the Fertilizer sector (on feed). Average daily volume improved 8%WoW to 297.4 million shares during the week under review.
Amongst major positive news flows which were largely ignored by the investors included: 1) Pakistan reportedly requesting Saudi Arabia and the UAE to convert US$5 billion deposits into long-term loan, 2) IMF approving disbursement of US$452 million second tranche for Pakistan, 3) current account deficit appearing in November 2019, but down 73%YoY, 4) ECC granting permission to OGDC and PPL to participate in the bidding round for an offshore block in Abu Dhabi, and 5) SBP expressing hopes of attracting foreign inflows in longer-tenor securities.
Foreigners emerged net buyers with US$3.1 million along with Insurance with US$8.7 million and Companies with US$5.4 million. As against this, Banks were net sellers of US$5.5 million and joined by Mutual Funds and Others with cumulative net sell of US$12.1 million (possibly due to year-end realignment). Top performers included: PPL, CHCC, OGDC, MEBL and NCL, while laggards were: FFBL, ASTL, FCCL, PAEL and KEL.
Following a measured response by Director General ISPR, the week closed in green, depicting easing political temperature. Going forward, analysts expect the market sentiment to improve considerably. Moreover, year-end window dressing by the local AMCs could provide additional support to the market. That said, market participation may remain weak due to the Christmas season, a phenomenon usually witnessed in the last week of the year.