Higher than expected inflation recorded in January 2020 dampened investors’ sentiments on growing fears that monetary policy easing could be delayed. The benchmark index of Pakistan Stock Exchange (PSX) declined 3.6%WoW to close at 40,144 for the week ended 7th February 2020. Average daily trading volume plunged to less than 168 million shares, down almost 11%WoW as the beginning of earnings season failed to steer investors’ participation. Volume leaders for the week included: BOP, HASCOL, MLCF and UNITY. While FFC managed to post gains, laggard included DGKC, HASCOL, CHCC, FFBL and MLCF.
Key news flows driving sentiments included: 1) Pakistan likely to undergo a tough second quarterly review with visiting staff of IMF as the country’s fiscal deficit breached 2.3% of GDP in the first half of 2019-20, despite a tight control on the GoP’s expenditure, 2) FBR’s tax collection was recorded at Rs1,341 billion during 1HFY20 as compared to Rs1,066 billion in the corresponding period of last fiscal year, reflecting an increase of 27%YoY, 3) GoP expects foreign investment in treasury bills could rise to US$5 billion by end FY20, the country has already attracted US$2.9 billion foreign investment in T-bills (including US$25.5 million in Pakistan Investment Bonds) during first seven months of current financial year, 4) Moody’s Investors Service on Thursday maintained its forecast for stable outlook of five leading Pakistani banks over the next 12-18 months, and 5) Cement exports rose by almost 40%YoY to 0.808 million tons in January 2020. As against this, local sales increased by around 6%YoY to 3.265 million tons during the month under review.
With earnings season in full swing during the coming week companies scheduled to announce the results include CHCC, NETSOL, BAFL, DGKC, NML and LOTCHEM. Below expectations performance of Cement companies is likely to keep investors’ participation low, Chemicals and Banks could drive volumes. The news flow, particularly surrounding any fiscal adjustments could sway sentiments drastically on the ongoing second review of IMF.