Weekly Review: Monetary policy to set market trend

KARACHI: The change in key policy rate to be announced by the State Bank of Pakistan (SBP) on May 20 will set the market trend during the next week.

“With monetary policy to be announced in the coming week investors are most likely to have a cautious approach and bearish sentiments may persist,” analysts at Arif Habib Limited said on Saturday.

Given uncertainty in PKR/USD parity, macro-economic concerns and lack of positive triggers we expect the market to trade range bound. However, attractive valuation may revive investor sentiments.

The analysts said that the market continued to bleed this week, commencing on a negative note.

The expectation of positive sentiments upon agreement of IMF Program did not materialize.

Investors remained cautious due to tough measures attached with the program.

However, investors took a sigh of relief mid-week owing to Pakistan’s emerging market status being retained, positive news regarding offshore drilling (final stages) and approval of amnesty scheme by the cabinet.

The momentum, however, was short lived as the Pak Rupee witnessed depreciation against the USD and concerns persisted over a significant rate hike in the upcoming monetary policy statement.

The market shed 1,550 points (down by 4.5 percent) WoW, closing at 33,166 points.

Negative sector-wise contributions came from i) Fertilizers (335 points), ii) Cements (237 points), iii) Commercial Banks (229 points), iv) Oil & Gas Marketing Companies (219 points) and v) Pharmaceuticals (92 points).

Whereas, sectors that contributed positively include i) Oil & Gas Exploration Companies (83 points) and ii) Power Generation (19 points).

Scrip-wise negative contributions came from FFC (161 points), PSO (85 points), ENGRO (80 points) and HBL (76 points). Whereas, positive scrip-wise contributions came from PPL (109 points), HUBC (84 points), and POL (49 points).

Foreign buying continued this week clocking-in at USD 8.2 million compared to a net buy of USD 10.4 million last week. Buying was witnessed in Commercial Banks (USD 8.2 million) and Cement (USD 5.6 million).

On the domestic front, major selling was reported by Mutual Funds (USD 19.1 million) and Insurance Companies (USD 2.4 million). Average Volumes settled at 107 million shares (up by 46 percent WoW) while value traded clocked in at USD 29 million (up by 29 percent WoW).

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