Market under pressure; rudderless sessions likely to continue

The capital market remained under pressure throughout the week on back of adjustments as stocks entered overbought zone, and fear of rising inflation kept investors at bay, dealers said.

An analyst from Habib Metro-Financial Services said, “We expect the bourse to continue showing rudderless sessions, finding triggers once the results season kicks into full gear.”

However, due to improving macroeconomic indicators, “we continue recommending investors to find fundamentally strong stocks trading at attractive levels and buy on dips”, the analyst added.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares ended closed with a loss of 1.24 percent or 535 points to close at 42,633.02 points level. This range-bound performance could be attributed to lack of potent positive triggers.

With regards to investor participation, an average of 187 million shares were traded per day during the week down 24 percent compared to the preceding week, while daily traded value averaged at $51 million up 64 percent on weekly basis.

An analyst from Arif Habib said the market would likely turn positive on improving macroeconomic position, foreign net inflows in debt securities up to $2,588 million, rising foreign exchange reserves, and stable market determined exchange rate.

Moreover, with the likelihood of Pakistan getting out of the Financial Action Task Force grey list, investor sentiment should remain upbeat, he added.

Trading commenced on a negative note attributable to Oil and Gas Regulatory Authority (OGRA) proposing gas price hike coupled with government’s decision to eliminate GIDC on fertiliser sector to reduce prices of urea, which might hurt bottom-line of some companies due to different type of gas tariffs.

On the other hand, oil and gas exploration sector remained under pressure amid decline in international oil prices by 2.0 percent WoW coupled with appointment of financial advisor to sell stake of Oil and Gas Development Company (OGDC).

Meanwhile, increase in prices of key commodities like wheat and sugar was set to elevate headline inflation with a stronger force considering their weights in CPI index.

NFDC released fertiliser production and sales numbers for December 2019 during the week, showing record high urea off-takes of 1.345 million tons up 89 percent compared to the same month last year.

The government also announced it would abolish the GIDC levy, which was positive for Fauji Fertilizer, up 3.52 percent, but negative for Engro Fertilizers, down 7.99 percent.

Other notable news during the week included prime minister’s meeting with US president, who offered help with the Kashmir issue, a new textile policy which could increase textile exports to $25 billion by 2025, Pakistan falling three spots on the Corruption Perception Index, and decline of 5.93 percent in Large Scale manufacturing during 5MFY20.

Contribution to the downside was led by fertiliser (204 points) due to removal of GIDC, commercial banks (87 points) amid profit taking, oil and gas marketing companies (71 points), oil and gas exploration companies (61 points) due to decline in international prices, and tobacco (61 points).

Scrip wise major losers were Engro (153 points), OGDC (93 points), Engro Fertiliser (80 points), Pakistan Tobacco (53 points), and Habib Metropolitan Bank (36 points).

Whereas, scrip-wise major gainers were Fauji Fertilizer Company (56 points), Mari Petroleum (48 points), and Colgate (27 points).