Pakistan Stock Exchange benchmark index declines 0.8%WoW

Pakistan Stock Exchange (PSX) remained volatile during the week ended on 26th February 2021 and the benchmark index closed at 45,865 points, down 0.8%WoW. Average daily trading volume declined to 589.3 million shares as compared to 595 million shares a week ago.

Expectations surrounding FATF announcement, month-end phenomena, international markets’ performance (10-year US treasury yield rising to one year high level of 1.6% on account) and possible improvement in diplomatic relations with India, influenced market the sentiments during the week under review.

FATF statement can be termed encouraging, with Pakistan in compliance with 24 out of 27 action items.

Other major news flows impacting the market were: 1) Pakistan and IMF under discussion to either increase remaining tranche size or extend the time frame beyond September 2022 for the existing US$6 billion Extended Fund Facility, 2) Government raising edible oil prices by 18% or Rs30/kg to Rs200/kg, 3) current account deficit for January 2021 rising to US$229 million, taking 7MFY21 current account surplus to US$912 million, 4) Privatization commission planning to conduct three capital market transactions in April 2021 for divesting 20% shares of PAKRI, 10% of PPL and 7% of OGDCL, 5) Potential NAB investigation against certain IPPs delaying release of first tranche under agreement with IPPs and lastly 6) GoP planning to mobilize US$1 billion from Eurobonds to be issued next month.

Within major sectors, only Cements achieved positive return, while OMCs and E&Ps were the major losers. Amongst other sectors, Automobile Parts and Refineries closed the week with gains, while Glass & Ceramics was down.

Flow-wise, foreigners turned net buyers, with a net buy of US$0.28 million, together with brokers which was mainly absorbed by Insurance and Individuals.

Top performers of the week included: BNWM, ILP, LUCK, DCR and FML, while laggards were: GATI, NBP, NML, FFBL and HASCOL.

With the result season in the rearview, market is expected to look forward to Senate elections and macro developments. Moreover, investors are likely to focus on commodity up-cycle related gainers and upbeat demand particularly in Cyclicals (Cements, Steels and Autos). An eye should also be kept on banks where higher inflation could pop up expectation of an eventual rate hike.

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