Zubair Yaqoob
Karachi
With fear of contagion of the Chinese Corona virus across the world, global equities staged a slide with the local equity bourse following suit. This was primarily marked by lower crude prices at the beginning of the week, which kept the index-heavy E&P stocks under pressure. In addition, the SBP kept its benchmark policy rate unchanged in the latest monetary policy statement which triggered select Cement and Steel (leveraged) scrips to tumble during mid-week. Finally, concerns over rising inflationary readings and political pressure has also kept the index dull. The KSE-100 Index closed at 41,631pts (down by 1,002pts; 2.4% WoW). Sector-wise negative contributions came from Commercial Banks (-431ts), Oil & Gas Exploration Companies (-303pts), Power Generation & Distribution (-113pts), Cement (-66pts), and Fertilizer (-41pts). Scrip-wise negative contributions were led by MCB (-126pts), PLL (-108pts), UBL (-97pts), HBL (-96pts) and HUBC (-95pts). Foreign selling this week clocking-in at USD 8.0mn compared to a net buy of USD 4.8mn last week. Selling was witnessed in Cement (USD 4.2mn) and Textile composite (USD 1.3mn). On the domestic front, major buying was reported by Individuals (USD 9.8mn) and Broker Proprietary Trading (USD 2.0mn). Average Volumes settled at 188mn shares (down by 1% WoW) while average value traded clocked-in at USD 46mn (down by 7% WoW). Other major news: PTI govt notifies GIDC relief for fertiliser sector, SBP keeps policy rate unchanged at 13.25 percent, Proposal on gas prices deferred again, Circular debt: Competitive bidding to be arranged for raising Rs200 bn from banks, IMF to hold talks from February 3 under $6 billion EFF, and $497m Thar coal project achieves financial close. The market appears range bound in the mid-term with IMF commencing talks with the Pakistani team next week over release of its third tranche under the USD 6bn EFF. Moreover, local investors await final verdict of the FATF next month whereby decision over Pakistan’s status (White, Grey or Black) will be taken. With that said, long term prospects appear upbeat given improvement in the external account and stable PKR-USD parity. The KSE-100 index is currently trading at a PER of 7.2x (2020) compared to Asia Pac regional average of 11.9x and while offering DY of ~6.6% versus ~2.8% offered by the region.
