After ending the last week on a negative trajectory, the Pakistan Stock Exchange (PSX) is likely to remain range-bound in the week starting today (Monday) due to significant challenges haunting the market for the last many weeks.
The PSX has been trading in a range of 46,600 to 47,200 points for the last many weeks where the level of 46,600 has been providing strong support amid challenges of rising import bill, Afghan situation, inflationary concerns, rupee-dollar parity, lack of clarity on the macro-economic front, foreign selling, and others.
Announcement of monetary policy by the State Bank of Pakistan for the next two months on Monday (today) will keep the market under pressure as different reports are circulating in the media.
Though the majority of investors are of the view that the central bank will continue with the status quo and maintain the interest rate at 7 percent, some think that it might be increased by 25bps due to rising inflationary data and massive increase in import bill. Any increase in policy rate may affect the market negatively for at least a couple of sessions.
The decision of the British authorities to remove Pakistan from the travel red list and decreasing number of coronavirus cases in the country are positive indicators for the market; however, cancellation of a cricket series by New Zealand and leaving Pakistan abruptly due to a “security alert” may keep foreign investors at bay.
The decision of the New Zealand authorities also caused panic during the second session of trading on Friday last.
On the other hand, Finance Minister Shaukat Tarin is expected to visit the United States in near future and have a meeting with the International Monetary Fund (IMF) authorities about the lender’s next review of the loan programme.
The government has paved the way to conclude talks positively and some market sources hint at rupee’s depreciation, increase in tax rates for non-filer commercial and industrial electricity consumers, and massive increase in oil prices as the steps taken by the government to ensure revival of the IMF loan programme.
The benchmark KSE-100 Index shed 562.21 points (-1.19 percent) during the last week to close at 46,636.08 points.
Average volumes declined 7 percent to clock-in at 400 million shares per day, while the average value of traded securities surged 3 percent to settle at $90 million. Foreigners offloaded stocks worth of $10.9 million compared to a net sell of $18.6 million in the preceding week. On the local front, buying was reported by Individuals ($16.8 million) followed by Banks/DFI ($7.3 million).
Sector-wise negative contributions came from cement (287 points), refinery (55 points), oil & gas marketing companies (54 points), food & personal care products (51 points), and technology & communication (44 points).
The sectors propping up the index were commercial banks (130 points), ii) tobacco (6 points) and iii) synthetic & rayon (5 points).
The index is currently trading at a PER of 5.8x (2021) compared to the Asia Pacific regional average of 14.4x (2021) while offering a dividend yield of 7.9 percent versus 2.3 percent offered by the region.
According to market experts, the depreciating local currency and increasing current account deficit kept the investors concerned last week. Moreover, higher coal prices placed selling pressure on cement, while higher oil prices raised concern over the future import bill.
Similarly, concerns related to ballooning trade deficit and higher commodity prices continued to weigh on investors’ sentiments.
However, the equities staged a comeback, as the rupee took a breather and clawed back some losses against the greenback later in the week, they added.