Pressure likely on benchmark KSE-100 index in coming week

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Zubair Yaqoob

Karachi

Given the outbreak of Coronavirus across 40-odd countries with no signs of containment in sight, global equities and commodities (such as Oil) were quick to witness a rout. Moreover, Moody’s report signaling an adverse impact on local Banks post Pakistan’s inclusion in the FATF’s Grey List, further eroded sentiments.
That said, Pakistan and IMF’s staff-level agreement on the second review under the USD 6bn Extended Fund Facility (EFF) provided respite to the market. The local equity bourse shed 2,266points (5.6% WoW) to close at 37,984pts, depicting the biggest weekly decline since 16th Jun’17 in points. Sector-wise negative contributions came from E&P (575pts) led by weakness in International oil prices, Commercial Banks (531pts), Fertilizer (278pts), Power Generation & Distribution (233pts), and Oil and Gas Marketing Companies (191pts).
Scrip-wise negative contributions were led by PPL (256pts), OGDC (194pts), HUBC (170pts), HBL (152pts), and ENGRO (103pts). Foreign selling continued this week clocking-in at USD 22.5mn compared to a net sell of USD 8.6mn last week. Selling was witnessed in Commercial Banks (USD 7.6mn) and E&P (USD 4.8mn). On the domestic front, major buying was reported by Insurance Companies (USD 25.3mn) and Banks / DFIs (USD 7.8mn). Average Volumes settled at 174mn shares (up by 63% WoW) while average value traded clocked-in at USD 48mn (up by 54% WoW).
Other major news: Pakistan-IMF reach staff-level accord on second review, Trump tells India ties with Pakistan are very good, Pakistan pays Russia Rs1,442 bn to settle 40 years old trade dispute, Investors offer Rs1.4tr for T-bills, Exporters’ key demands on energy tariff accepted, and Inclusion on ‘grey list’ credit negative for banks: Moody’s.
With the extension of global panic over Coronavirus and its spill-over on markets, currencies and commodities alike, analysts expect pressure on the benchmark KSE-100 index to sustain. Albeit, topsy-turvy trend of the market on last day of the week suggests that recent correction has opened up valuations and select sectors may come under limelight. The KSE-100 index is currently trading at a PER of 6.6x (2020) compared to Asia Pac regional average of 11.4x and while offering DY of ~7.2% versus ~2.9% offered by the region.