Week trading activity remained dull and index movement was mixed attributable to concerns over a meeting of the Financial Action Task Force (FATF), convened to ascertain Pakistan’s status (Grey or White List); it became evident by Thursday evening that Pakistan is likely to stay in the Grey List.
On the other hand, investors remained cautious on the back of a strict stance of the International Monetary Fund (IMF) staff to keep the budgeted revenue targets for FY20 unchanged while talks regarding the release of the third tranche remain ongoing.
Despite increase in international oil prices by 4.5% WoW, Oil and Gas Exploration sector remained under pressure due to foreign selling. As a result, the benchmark KSE-100 index closed at 40,249pts, merely increased by 6pts or 0.01% WoW. Contribution to the upside was led by Commercial Banks (+133pts) due to financial result of HBL and UBL was better than expectation, Cements (+20pts), Textile Composite (+15pts), Leather and Tanneries (+11pts), and Automobile Parts and Accessories (+9pts).Scrip wise major gainers were HBL (+70pts), UBL (+53pts), OGDC (+37pts), MCB (+34pts), and FFC (+30pts). Whereas, scrip wise major losers were ENGRO (-65pts), PAKT (-54pts), and PSO (-48pts). Foreigners offloaded stocks worth of USD 8.57mn compared to a net sell of USD 11.15mn last week.
Major selling was witnessed in Oil and Gas Exploration Companies (USD -3.02mn) and Cement (USD -2.77mn). On the local front, buying was reported by Insurance Companies (USD +7.84mn) followed by Other Organizations (USD +3.81mn).
That said, average daily volumes for the outgoing week were down by 37% to 106mn shares likewise value traded decreased by 23% to USD 31.2mn. Other major news: Pakistan set to get four-month FATF breather, C/A gap narrows 72pc in July-Jan on improved trade balance, Foreign exchange: SBP reserves jump $74m to $12.5b, Hot money inflows cross $3bn, and Large-scale manufacturing contracts 3.4 percent in first half.
Analysts expect the equity bourse to remain neutral to positive on the back of conclusion of the FATF review, expected approval of IMF’s third tranche, and imposition by the Federal Government on export of essential food items (Onions, Potatoes and Tomatoes) so as to control rising inflation along with deferment of hikes in utility rates till Jun’20.
Moreover, improvement witnessed on macroeconomic front, with the Current Account Deficit (CAD) shrinking by 72% in 7MFY20 and rising foreign investment in debt securities exceeding the USD 3bn mark, also augur well. The KSE-100 is currently trading at a PER of 6.9x (2020) compared to Asia Pac regional average of 12.2x while offering a dividend yield of ~6.8% versus ~2.8% offered by the region.