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February 23, 2020

Stocks likely to stay put awaiting positive triggers


February 23, 2020

The market ended flat on week-on-week basis due to selling pressure from foreign fund houses following Financial Action Task Force (FATF) development under which the country would be kept in the grey list for another four months, dealers said.

An analyst from BMA Capital Management said, “Certain developments have potential to revive sentiments, including the planned visit of China’s president and conclusion of the US-Taliban Peace talks.”

Moreover, the FATF’s commentary post the conclusion of the plenary meeting has the potential to set the tone for next week, the analyst said.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index inched up 0.01 percent or 6 points to close at 40,249 points level at the end of the week.

An analyst from Arif Habib said, “We 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 federal government ban 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 June 2020.”

Moreover, improvement witnessed on macroeconomic front, with the current account deficit (CAD) shrinking by 72 percent during the first seven months of the current fiscal year, and rising foreign investment in debt securities exceeding the three billion dollars mark, also augur well, he added. 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 continue.

Despite 4.5 percent increase in international oil prices during the outgoing week, oil and gas exploration sector remained under pressure due to foreign selling.

Foreign investors were seen offloading seven million dollars during the outgoing week. This was mainly concentrated in exploration and production, $2.8 million, and cements, $2.7 million.

Among domestic participants, insurance and other organisations were major buyers with inflows of $6.0 million and $3.6 million.

The market witnessed a dull week owing to one more factor; the result season was not able to stir market activity due to uninspiring financial performances of key sectors.

Resultantly, the market activity remained down where average daily turnover fell by 35.4 percent, registering around 107 million shares, whereas activity value was noted at $31.3 million, down 22 percent as compared to the preceding week.

Losses made during the previous trading period were mostly covered, as investors sentiment turned positive after successful dialogue between the Securities and Exchange Commission of Pakistan (SECP) and Pakistan Stock Exchange Stockbrokers Association (PSA).

Following detailed consultation, PSA and the SECP decided to amend Securities Brokers (Licensing and Operations) Regulation 2016.

Contribution to the upside was led by commercial banks (133 points) due to financial result of Habib Bank Limited (HBL) and United bank Limited (UBL), which was better than expectation, cements (20 points), textile composite (15 points), leather and tanneries (11 points), and automobile parts and accessories (9 points).

Scrip wise major gainers were HBL (70 points), UBL (53 points), Oil and Gas Development Company (37 points), MCB Bank (34 points), and Fauji Fertilizer Company

(30 points). Whereas, scrip wise major losers were Engro (65 points), Pakistan Tobacco Company (54 points), and Pakistan State Oil (48 points).