PSX braces for burns as political heat picks up

Stocks were wrecked in the week as investors just sat on their hands waiting for the global terror financing watchdog’s verdict on Pakistan, while rapidly rising political temperature is feared to evaporate more gains from the capital market down the line, dealers said.

Pakistan Stock Exchange's KSE-100 shares index closed 1.6 percent or 634 points lower in the outgoing week and closed at 40,164 points week-on-week (WoW). Average volumes were recorded at 296 million shares, down 29 percent WoW, while average traded value clocked in at 61 million dollars, up 24 percent WoW.

Brokerage Arif Habib Limited in a research note said, “The stock market next week will be dictated by FATF’s plenary session scheduled for 21st to 23rd October”.

“A rise in the COVID-19 infection ratio to over 2 percent may also trigger another smart lockdown in big cities,” it said.

“We advise investors to keep a long view and invest in fundamentally strong scrips,” the brokerage house added.

Salman Ahmad, head of institutional sales at Abba Ali Habib Securities, said, “The bears regained the control of the bourse during the week on political uncertainty”.

Ahmed said the capital market started the week on a negative note as index lost more than 588 points on Monday after FATF’s Asia Pacific Group (APG) decided to retain Pakistan on enhanced follow-up list.

“Rising political noise muted sentiments during the week after opposition shared a roadmap of antigovernment rally,” he said.

Investor confidence further eroded after a rise in fresh coronavirus cases in Sindh raised fears of mini smart lockdowns in province, Salman added.

Muhammad Saeed Khalid, head of research at Shajar Capital, said, “With respect to next week’s sentiments, we expect the correction to continue in the stock market as investors will be more concerned over the FATF decision”.

“We also believe the upcoming economic numbers along with the balance of payment numbers will likely play an important role in recovering volumetric activity in the market,” he stated.

Recovery was likely to start from 1QFY21 result season as strong macros would resultantly improve the profitability of the manufacturing industries, Khalid added.

Foreign investors sold equities worth $2.7 million compared to a net-sell of $7.5 million last week. Major selling was witnessed in E&P ($2.8 million) and cement ($0.8 million).

On the domestic front, major buying was reported by banks/DFIs ($7.6 million) and insurance Companies ($2.4 million).

Ansreen Malik from BMA Capital Management Equity Desk said, “Considering stable monetary policy and strengthening rupee against US dollar, we expect KSE-100 to perform well in the coming weeks”.

“Key news to follow next week will be the T-bills’ auction scheduled for 21st October to 23rd October 2020 in which the government plans to borrow Rs350 billion against the maturity of Rs485 billion,” she said.

“Cautious buying is recommended at these levels amidst heightened political noise. Accumulating positions on dips will be the best strategy going forward,” Malik added.

Sector-wise negative contributions came from oil and gas exploration companies (212 points), cement (116 points), power generation and distribution (60 points), oil and gas marketing Companies (56 points), and technology & communication (51 points).

On the other hand, positive contributions were led by chemical-makers (16 points) and commercial banks (10 points).

Scrip-wise top damage-makers were HUBC (69 points), PPL (68 points), and OGDC (63 points).