Market likely to remain range bound next week

After recording two successive weeks of gains, the capital market lost 1.76 percent last week, as investors awaited the Financial Action Task Force (FATF) decision, which came out during the last trading session to keep Pakistan in the grey list till February 2020.

During the week, investor sentiment improved after three countries (China, Turkey and Malaysia) voted in favour of Pakistan, which eventually helped save the country from being blacklisted by FATF. However, Pakistan still remains on the grey list of FATF.

Pakistan Stock Exchange (PSX) turned negative after a two weeks bull run. The benchmark KSE-100 shares index was down by 1.8 percent as it shed 606 points to close at 33,870 points level.

The average traded volumes settled at 140 million shares down by 51 percent on week on week basis, while average value traded clocked-in at $30 million, down by 47 percent on week on week basis.

Foreign selling continued this week clocking-in at 2.1 million dollars compared to a net sell of 4.2 million dollars last week. Selling was witnessed in commercial banks at 3.4 million dollars, and exploration and production at 1 million dollars. On the domestic front, major buying was reported by individuals at 8.4 million dollars and banks / DFIs at 5.4 million dollars.

Based on NCCPL data, foreigners remained net sellers amounting to 2.14 million dollars. On the local’s side, individuals were net buyers of 8.30 million dollars, while brokers were net sellers of 5.14 million dollars.

Global oil prices showed large volatility during the week as the shadows of US-China trade talks and lower production by OPEC continued to hover over the commodity.

Brent and WTI closed the week 1.26 percent and 1.19 percent higher at 60.17 dollars per barrel and 54.48 dollars per barrel. But selling from foreign investors and some high net worth individuals lead to trimming with oil and gas sector showing a decline of 2.41 percent on week on week basis.

An analyst from Arif Habib said, “We expect the market to be range bound next week. Pakistan may have narrowly escaped being blacklisted, but the FATF has tasked the government to address outstanding issues by February 2020 In order to avoid being placed on the black list.”

With many financial results to be announced in the coming week, the activity would likely be accordingly influenced, the analyst added.

A leading analyst at BMA Capital Management said that with concerns of stringent FATF action largely addressed with Pakistan staying on the grey list, market sentiments would likely pick up. Going forward, investors may, however, remain wary of any uptick in political noise.

Further support might come from ongoing result season where any earnings surprise and/or announcement of bonus/cash dividend might generate investors’ interest in select scrips.

Sector-wise positive contributions came from fertilisers (99 points), food and personal care products (15 points), and chemical (14 points), while negative contributions were led by banks (279 points), cement (89 points), and E&P companies (78 points).

Scrip-wise negative contributions were led by HBL (111 points), UBL (84 points), Lucky Cement (65 points), Hubco (58 points), and Pakistan Oilfields (57 points).