Index likely to remain range-bound amid lack of triggers

Stocks recovered during the outgoing week with renewed buying interest from key players and financial institutions mainly on grounds that the lower inflation rate has given room to cut the interest rate.

The Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index surged 2.68 percent or 795 points on week on week basis and closed at 30,467 points level. Overall market activity went down 25 percent as average daily turnover stood at 93 million shares, while average daily value saw a dip of 26 percent on week on week basis to $22 million.

Foreign investors continued to remain net sellers during the outgoing week, offloading scrips worth $5.45 million (four days). This was mainly concentrated in oil and gas $2.4 million, commercial banks $2.4 million, and cements $2.3 million. Amongst local participants, individuals $5.3 million and NBFCs $1.9 million provided most of the liquidity.

Contribution to the upside was led by oil and gas exploration companies (299 points) amid rising international oil prices WoW, commercial banks (152 points), power generation and distribution (103 points), oil and gas marketing companies (75 points), and fertiliser (49 points).

Based on NCCPL data, foreigners remained net seller amounting to $5.45 million. On the local’s side, mutual funds remained net sellers of $3.11 million, while individual remained net buyers of $6.15 million.

The government has decided to take back the controversial Gas Infrastructure Development Cess amendment ordinance promulgated last week that offered Rs210 billion financial relief to big industrial consumers of gas.

The government will also ask the Supreme Court to club all stay orders issued by various high courts and itself take an expedited decision in ongoing cases on the GIDC. However, fertiliser sector showed mix trends during the week with an overall gain of 0.27 percent on week on week basis.

Oil prices edged higher on Friday, with crude poised for multi-week gain amid a sharp drawdown in US inventories, while trade tensions eased after Washington and Beijing agreed to hold high-level talks next month.

In line with international crude and Brent prices, the E&P sector was amongst the best-performing sectors during the week with a weekly gain of 6.73 percent.

An analyst from Habib Metro-Finance said, “In the days to come, we expect the PSX-100 to underperform with range-bound trading sessions amid lack of triggers and deteriorating macroeconomic conditions.”

Staying on the sidelines with ample liquidity for value hunting in blue-chip stocks would be a wise strategy, the analyst added.

An analyst from BMA Capital Management said a meeting of the Financial Action Task Force was scheduled to be held in Bangkok on September 9, 2019, to discuss the progress Pakistan has made against terror financing. Any positive development on this front might boost to investor sentiments.

“We believe upcoming T-Bill auction (September 11), PIB auction (September 18) and monetary policy announcement (due in last week of September) will be the key events for the direction of interest rates. IMF staff is also scheduled to visit Pakistan on September 17 to review,” he added.