PSX may ‘sustain’ Covid pressure amid strong rupee, external position

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Karachi

Pakistan Stock Exchange (PSX) is likely to move north this week amid strengthening Pakistani rupee against the dollar and stable external position despite rising cases of Covid-19 in the country and smart lockdowns.

The benchmark KSE-100 Index of PSX gained 620.32 points (+1.38 percent) during the last week as it opened at 44,901.31 points on Monday and closed at 45,521.63 points on Friday last. Appreciation of Pakistani rupee against the US dollar continued last week and overall local currency gained Rs1.38 against the greenback.

According to the State Bank of Pakistan, the US dollar opened at Rs155.97 on Monday and closed at Rs154.59 on Friday last. This is the highest level of Pakistani rupee against the greenback since March 09, 2020.

The approval of $500 million third tranche from the International Monetary Fund (IMF) and $1.336 committed from the World Bank (WB) have further stabilized Pakistan’s external position.

With inflows of foreign funds, the central bank reserves climbed up by $275 million on a week-on-week (WoW) basis.

The oil prices in the international market remained almost flat on a WoW basis, with Brent gained a little from $64.53 to $64.57 and West Texas Intermediate (WTI) fell modestly to $60.97 from $61.42 per barrel. However, the closure of Suez Canal can push the prices up as witnessed on Wednesday and Friday last when prices went over 4 percent up on both days.

Again, this closure has shot up the rates of tankers, which are likely to impact both imports and exports.

Last week also witnessed the roll-over week and this pressure on traders is no more for coming weeks, as traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract in a further-out month to avoid the costs and obligations associated with settlement of the contracts.

Additionally, Current Account Deficit for the month of February 2021 witnessed 75 percent YoY/76 percent MoM decline.

The benchmark KSE-100 index is currently trading at a PER of 6.8x (2021) compared to Asia Pac regional average of 17.0x and while offering DY of around 7.0 percent versus 2.6 percent offered by the region.—TLTP