PSX braces for virus bite amid tepid recovery bets

Stocks next week will take cue from the virus situation amid fears that economy was once again on the brink of being taken hostage by the lockdowns, while a second wave continues to lay waste to global markets, dealers said.

Pakistan Stock Exchange's KSE-100 shares index plummeted 3.34 percent or 1,378 points to close just below the psychological index level of 39,888 points week on week (WoW).

Muhammad Saeed Khalid, head of research at Darson Securities said, “In the week ahead we expect the market to recover cheering lower-than-expected inflation numbers and some favourable oil marketing and cement industry figures and better-than-expected quarterly results,” he said.

On the contrary, continued global equity selloff along with the resurging local COVID-19 cases might increase selling pressure in the capital market, Khalid added.

Yousuf Saeed, head of research at Darson Securities, said, “Amicable settlement of future contracts and good corporate results are likely to lift sentiment and some buying may be witnessed in the gaps”.

However, the trend was mostly likely to be dictated by the pandemic situation, as investors were afraid the government would go for a smart lockdown if cases saw a spike, he said.

“US elections, under-pressure dollar, and increasing coronavirus cases will have an impact on global equity and commodity markets. With all these factors in play, the market will remain mixed or under pressure for the later part of the week,” Saeed added.

Shahab Farooq, director research at Next Capital, said, “The coming week is likely to remain volatile mainly owing to US presidential polls, rise in virus cases, and developments in the Pakistan and IMF talks”.

US elections would play a major role in setting the direction for global as well as local capital market, influencing investment flows from foreign investors, who are currently net sellers of equities in Pakistan, he said.

“The recent resurgence in local virus cases may also create pressure in the market as the government moves to implement preventive measures,” Farooq added.

Despite favorable financial results, investors remained on the selling side mainly on the rollover week.

Foreign investors sold equities worth $21.3 million compared to a net sell of $6.9 million last week. Selling was witnessed in cements ($7.6 million) and cCommercial banks ($4.9 million).

On the domestic front, major buying was reported by insurance companies ($7.8 million) and individuals ($6.4 million).

Ansreen Malik from BMA Equity Desk said, “As the second wave of coronavirus resurfaces, we advise investors to remain cautious amid the looming threat of smart lockdown and concerns over high inflation”.

However, the market may rebound on account of outstanding corporate results and further appreciation of rupee against the greenback, Malik added.

Sector-wise negative contributions came from commercial banks (499 points), oil & gas exploration companies (247 points), fertiliser (145 points), textile composite (131 points), and oil & gas marketing companies (103 points).

Scrip-wise negative contributions were led by HBL (149 points), UBL (134 points), POL (111 points), ENGRO (87 points), and OGDC (60 points).