PSX to strengthen if virus weakens down the line

Stocks remained under pressure during the short week as rollover adjustments and year-end selling weighed heavy, amid a new virus variant-led global slide; however, the future trend now hinges on domestic pandemic situation, dealers said.

Week-on-week, Pakistan Stock Exchange's (PSX) benchmark KSE-100 shares index lost 0.73 percent or 323.79 points to close at 43,416 points, touching a week-high of 43,791 points and a low of 42,757 points.

Muhammad Saeed Khalid, head of research at Shajar Capital said, “We believe the index to perform mainly on the NCPI (National Consumer Price Index) inflation numbers along with the Cement industry sales volume for the month of December 2020”.

“We also believe investors will continue to book capital gains ahead of CY20 financial results, he said.

Moreover, continued selling pressure was likely keep the index within the range of 43,000 to 44,000 points mainly owing to the rollover week and continued profit-taking by the mutual funds, banks and insurance companies, Khalid added.

An analyst from BMA Capital Management said, “Considering the news of global rollout of COVID-19 vaccine, approval of $900 billion stimulus package by US congress, resumption of Pakistan’s IMF program, continuation in economic recovery, and fresh allocations for CY21, we expect the market to remain upbeat in the coming weeks”.

“However, we flag our concerns on the spread of new strains of coronavirus in Europe,” analyst added.

An analyst from Arif Habib Limited said, "We expect the market to remain green due to slowdown in COVID-19 infection ratio, improvement on the macro-economic front amid higher remittances, resulting in current account surplus, stable PKR/USD parity, and rising construction activity, which will increase demand of cement and steel”.

However, a surprise surge in domestic COVID-19 infection ratio together with rising global coronavirus cases (as daily cases in December averaged more than 600,000, forcing the countries to impose lockdowns) may bring the market under pressure, analyst added.

During the outgoing week investor participation remained dull as average volumes declined 34 percent to 203 million shares, while average traded value also dropped to $75 million registering a drop of 21 percent from in the previous week.

Foreign investors sold equities worth $20.44 million compared to a net sell of $9.36 million last week.

Major selling was witnessed in fertiliser ($8.23 million) and power ($5.46 million).

On the local front, buying was reported by companies ($25.61 million) followed by broker proprietary trading ($1.17 million).

Pakistan witnessed significant drop in Coronavirus cases as 7-day moving average of infection ratio dropped to 6.75 percent and number of active cases stood at 38,200.

Over the week, Pakistan yet again witnessed monthly current account surplus in November to the tune of $447 million dollars, while months of 2020-21, the surplus stood at $1.6 billion, while securing $1.7 billion debt relief deal under G-20 Debt Service Suspension initiative.

Oil and gas exploration sector was on a downhill course owing to fall in crude oil prices, which declined by 2.3 percent. The main factor was the rise in virus cases, hinting at a slowdown in economies with a reduction in the demand of oil products.

Contribution to the downside was led by oil and gas exploration companies (229 points), commercial banks (155 points), fertilisers (77 points), pharmaceuticals (44 points), and food & personnel care products (24 points).

Scrip-wise major losers were PPL (76 points), OGDC (68 points), POL (52 points), MEBL (51 points), and ENGRO (55 points). Whereas, scrip-wise major gainers were TRG (46 points), CHCC (40 points) LUCK (34 points), SYS (29 points), and GHGL (29 points).