Pakistan Stock Exchange in the grip of bearish sentiments

Reeling from the previous week’s dejected performance; Pakistan Stock Exchange (PSX) witnessed bearish sentiments throughout the week. The week ended on October 08, 2021, closed the benchmark index at 44,477 points, posting a decline of 395 points or 0.9%. An upsurge in global commodity prices (Coal hit US$238/ton and Brent hit US$83.1/barrel), widening trade deficit and higher inflation kept the investors’ sentiments subdued. In addition to these, the upcoming IMF review and political uncertainties also dampened investors’ sentiments.

Cement sector was among the top laggards for the week, losing 5.6%WoW as coal traded at near 10 year high prices amid increased demand for power generation in developed economies.

Participation during the week remained dull with average daily traded volume reported at 265 million shares as against 355 million shares witnessed during last week. Sector wise, CRC prices increased to Rs239,000/ton.

Other major news flow during the week included: 1) IMF asking Pakistan to take additional taxation measures in the shape of income tax, sales tax and regulatory duty, 2) GoP debt rising to Rs39.7 trillion (up11.5%YoY) in August this year, 3) Pakistan’s exports to Afghanistan falling sharply after Taliban takeover, 4) cement sales dipping by 6% in first quarter of current financial year, 5) Russia expressing intention to invite Taliban to international talks on 20th of this month, and 6) PSMC suspending bookings for Alto AGS, Cultus VXL and Cultus AGS.

Top performers of the market included MARI, SEARL, COLG, UBL and MTL. Meanwhile laggards were: NATF, PIOC, GADT, FFBL and CHCC. Top volume leaders included WTL, TELE, UNITY, GGL and BYCO.

Flow wise, Individuals remained the major buyers with (net buy of US$7.13 million) followed by Mutual Funds (net buy of US$3.61 million), while Companies stood on the other side with (net sell of US$16.05 million) followed by foreigners (net sell of US$3.7 million).

Market direction is likely to be determined by upcoming result season, geopolitical situation and most important IMF review, formal talks are expected to take place in the next week. The GoP appears to be formulating strict measures to increase tax base. Moreover, gas and electricity tariff hikes are on the cards as well. Market participants should look to invest in the Banks where possibility of further interest rate hikes could bring the sector into limelight. Techs and Textiles (on currency depreciation) and Cements (on easing coal prices) are other sectors of interest. Major result announcements  in the next week include, EFERT, MEBL, EPCL and HBL.

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