Stocks to see volatility; focus turns to budget

Stocks ended short week with scanty gains and plain volumes, a trend that dealers said was here to stay, along with range-bound trade, until the announcement of federal budget 2020-21 and the measures to bring the COVID-19 pandemic-hit economy back on feet in the new fiscal year.

Pakistan Stock Exchange’s (PSX) KSE-100 shared index rose 0.28 percent or 95 points during the outgoing week and settled at 33,931 points. Average turnover was 214 million shares, up 4 percent, compared to preceding week while average traded value clocked in at $54 million, a jump of 13 percent.

An analyst from Arif Habib Limited said, "We expect the market to remain positive as companies resume operations following the easing of the lockdown, which is helping revive sentiment in the bourse”.

Moreover, there was a strong expectation that the budget was going to be growth-focused, which should also help keep confidence upbeat, he said.

“Developments suggest the government might take measures to plug the fiscal deficit and reduce reliance on external borrowing, while introducing new taxation measures to improve tax collection as against officials’ claims that it’s going to be a tax-free budget,” the analyst said.

Another analyst said, “A glance at the monthly performance shows, the index last month recorded a decline of 180 points, while it touched a peak of 34,395 points and a low of 33,126 points, with index closing at 34,112 points.”

The oil and gas exploration sector gained the most over the month on the back of a rally in oil price following an ease in the lockdown that revived the demand in major parts of the world and reduced inventory levels.

WTI crude futures jumped 13.07 dollars per barrel, or 66.3 percent, to $32.77 per barrel over the month from lows of 19.2 dollars per barrel during the beginning of the month.

Another leading analyst said, “Besides budgetary measures, two factors could determine the course of the market movements, which are: a rise in corona cases and announcement of inflation rate”.

Though, some analysts said an inflation rate in the range of 8.1 to 8.6 percent for the month of May 2020 was unlikely to have a big impact in the price run-up, but it would help strengthen the case of keeping interest rate in the single digit.

Moreover, during the outgoing week auction of long-tenor Pakistan Investment Bonds (PIBs) the cut-off yields moved down, the analyst said.

The PIB auction witnessed reduction in yields from previous cut-offs, down by 31-92 basis

points but slightly higher than secondary market yields 30-50 basis points.

Foreign offloading during the week stood at $2.42 million, compared to a net selling of $8.77 million last week.

Selling was witnessed in fertiliser ($2.54 million), textile composite ($1.81 million) and banks ($1.01 million).

On the domestic front, Individual accumulated stocks worth ($3.93 million), while buying by broker proprietary trading settled at ($0.62 million).

Sector-wise positive contributions came from: i) technology & communication (46 points), ii) cement (43 points), and iii) pharmaceuticals (39 points), whereas negative contributions came from fertilisers (43 points), and commercial banks (39 points).

Scrip-wise positive contributions were led by TRG (28 points), OGDC (26 points), and LUCK (23 points), while ENGRO (49 points), and UBL (30 points) were the main laggards.