Zubair Yaqoob
Karachi
Sentiment in the local equity bourse showed signs of inflection this week. Investors remained undeterred by initial signs of economic gloom from the pandemic which were reflected in broadly weak corporate earnings.
Progress on a vaccine against the Coronavirus reported by Gilead and Oxford University has uplifted investment climate in global markets which has spilled over on to the PSX as well.
In addition to the IMF’s RFI (Rapid Financing Instrument) worth USD 1.4bn, the ADB also announced USD 1.7bn to help Pakistan deal with the pandemic, which helped to jack up confidence in the markets. The PKR has also appreciated ~4% during April’19 which has also contributed to the turnaround in investors’ confidence.
The KSE-100 Index closed at 34,112 points in the 4-day trading week, up by 1,305 points WoW (3.98%). Sector-wise positive contributions came from Oil & gas exploration companies (396pts), Power generation and distribution (201pts), Fertilizers (158pts), Cement (126pts) and Oil & gas marketing companies (78pts). While scrip-wise positive contributions were led by HUBC (197pts), OGDC (144pts), PPL (119pts), POL (92pts) and FFC (79pts). Foreign offloading during the week arrived at USD 11.6mn compared to a net sell of USD 2.5mn last week.
Selling was witnessed in Oil & Gas Exploration and Production (USD 7.7mn), Fertilizers and Banks (USD 1.5mn each). On the domestic front, Mutual Funds accumulated stocks worth USD 4.2mn, while Companies bought USD 3.6mn. Average Volumes settled at 179mn shares (down by 32% WoW) while average value traded clocked-in at USD 49mn (down by 32% WoW).
Other major news: Inflow of hot money begins slowly, Govt to facilitate remittances through tax exemptions, NFC’s term ends without award, and ADB to lend Pakistan $1.7bn for pandemic shock (Dawn). Market should sustain its momentum next week. Any significant reduction in inflationary readings for April’20 should help boost the momentum further.
Expectations are ripe of a significant easing in the lockdown to help restart business activity in the country which is another positive for the market. The KSE-100 index is currently trading at a PER of 7.2x (2020) compared to Asia Pac regional average of 10.2x and while offering DY of ~8.1% versus ~3.1% offered by the region.
