Market likely to stay range-bound; quarterly results weigh

The capital market lost nearly 2.4 percent in the outgoing week, as selling from foreign fund houses, central bank’s status quo on interest rate, and new coronavirus scare spooked investors, who now wait for some positive developments to go for fresh buying, dealers said.

An analyst from Arif Habib said the market appears range-bound in the mid-term with International Monetary Fund (IMF) commencing talks with the Pakistani team next week over release of its third tranche under the $6 billion Extended Fund Facility programme. Moreover, local investors await final verdict of the Financial Action Task Force (FATF) next month whereby decision over Pakistan’s status (white, grey or black) would be taken. With that said long-term prospects appear upbeat given improvement in the external account and stable rupee-dollar parity.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares ended with a loss of 2.4 percent or 1,002 points to close at 41,631 points level. The market activity slowed down as evidenced by 13 percent week on week drop in the average daily turnover noted at 188 million shares, which was almost flat compared with a week ago.

An analyst from BMA Capital Managements said the upcoming week was expected to remain sentiment driven amid ongoing result season, scheduled release of key data points such as CPI Inflation, and sector releases also expected next week. Lack of fresh liquidity would likely keep upside in check. The IMF review scheduled for February 3, 2020 onwards and news flows surrounding it might prove to be a potential trigger for the market.

Foreign investors were seen offloading during the outgoing week, selling positions worth $6.3 million. This was mainly concentrated in cements, down $3.2 million, and textiles, down $1.3 million. On the other side, fertilisers witnessed $1.2 million inflows from domestic investors, while companies offloaded shareholding worth $5.7 million, and insurance $1.5 million, while individuals were seen absorbing liquidity.

An analyst from Habib Metro-Financial Services said the market would likely remain focused on the ongoing earnings season. Banks and exploration and production companies were expected to unveil stellar results, while cyclical stocks such as cements, steel, automobiles and oil marketing companies might disappoint.

“We look at the current breather in the index to be a buying opportunity for making gains in the remainder of the year,” he said. The flattening trend seen in the yield curve (after the recent treasury bills auction) especially on the shorter tenor and JP Morgan’s report recommending Pakistani bonds to its clientele (inflows in excess of $2.5 billion already seen in local bonds), cemented expectations of rates holding up for longer laying to rest any hopes of an early rate cut, which played its part in cooling down the equity bourse to some extent.

International oil prices receded on fears of a global demand slowdown spearheaded by China due to the outbreak of the deadly new coronavirus.

Brent slid below the $60/barrel mark impacting the local market, which created serious dents in the overall index. The positives from the government were left aside when the government announced that they have invited Malaysian government to participate in the bidding round or buying stakes in the Oil and Gas Development Company, Pakistan Petroleum Limited, and Mari Petroleum.

Sector-wise negative contributions came from commercial banks (431 points), oil and gas exploration companies (303 points), power generation and distribution (113 points), cement (66 points), and fertiliser (41 points).

Scrip-wise negative contributions were led by MCB (126 points), Pakistan LNG Limited (108 points), United Bank Limited (97 points), Habib Bank (96 points) and Hubco (95 points).