Zubair Yaqoob
Karachi
The market commenced on a negative note on Monday amid sharp decline in oil prices (Arab Light down by 27% DoD) after OPEC and Russia failed to agree upon oil production cut and Saudi Arabia engaged in an oil price war, consequentially, the market nose-dived by 2,302 points during the intraday.
The following day, the equity bourse displayed a swift rebound owed to expectations of a cut in interest rate, keeping in view decline in inflation. However, the sentiment was short lived as Pak Rupee depreciated against USD by 3% WoW.
Furthermore, the US President imposed a travel ban on most European countries which led to a meltdown in Global Markets given classification confirmation by WHO of Corona as a pandemic. Following suit, panic was also witnessed at the KSE-100 Index (market halt enforced thrice during the week). The KSE-100 Index closed at 36,061 points, down 2,159 points WoW (-5.65 %). Sector-wise negative contributions came from Commercial Banks (706pts), Oil & Gas Exploration Companies (650pts) and Fertilizers (317pts). Positive contributions came from Pharmaceuticals (35pts).
Scrip-wise negative contributions were led by PPL (262pts), HBL (177pts), and ENGRO (167pts) while positive contributions were led by SEARL (30pts), and INDU (20pts). Foreign selling continued this week clocking-in at USD 23.0mn compared to a net sell of USD 16.7mn last week. Selling was witnessed in Cements (USD 8.2mn) and Exploration & Production (USD 6.2mn). On the domestic front, major buying was reported by Insurance Companies (USD 25.2mn) and Banks/DFIs (USD 6.0mn). Average Volumes settled at 264mn shares (up by 9% WoW) while average value traded clocked-in at USD 81mn (up by 25% WoW).
Other major news ECC approves Rs20bn electricity subsidy for exporters till June, Reserves held by the State Bank of Pakistan increased by $32 million to $12.790 billion, Share of coal in power mix reaches 32pc, Auto sales decline across all segments, and Govt debt rises 5pc. With panic and uncertainty looming over the extension of Coronavirus, global markets are yet to ascertain long term impact. Market Analysts do highlight that international markets have fallen significantly from their all-time high levels whereas the local index had already undergone major correction prior to spread of the virus.
Announcement of Monetary Policy in the coming week remains a key event for the market, analysts expect the SBP to cut the benchmark rate by 50-100bps, which can be a positive trigger for the bourse. With that said, valuations across the board particularly in blue-chip scrips have reached attractive levels. The KSE-100 index is currently trading at a PER of 6.5x (2020) compared to Asia Pac regional average of 10.2x and while offering DY of ~7.7% versus ~3.1% offered by the region.
