Weekly Review: market likely to stay rang-bound

Weekly Review: market likely to stay rang-bound

KARACHI: The stock market is likely to stay range-bound during the next week owing to the upcoming monetary policy decision and large trade deficit.

Analysts at Arif Habib Limited said that with the Saudi Funds expected to arrive anytime soon, the market can rebound and the Pak Rupee slide will be contained.

Keeping in view macro-economic concerns investors are expected to have a cautious approach.

Albeit, it is expected the market to be range-bound in the upcoming week.

The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) is currently trading at a PER of 4.6x (2022) compared to the Asia Pac regional average of 14.7x while offering a dividend yield of 8.8 versus 2.2 per cent offered by the region.

The market commenced on a positive note given the fall in the international oil prices amid an outbreak of the new COVID-19 variant ‘Omicron’, subsiding concerns over inflation.

Moreover, approval of the Saudi fund of $3 billion and expectation of it arriving soon kept the sentiment high. Furthermore, the government paid Rs135 billion as a second installment to the IPPs under the 1994 policy, which further boosted the momentum. In addition to this, the market was reclassified to Frontier Market during the week, which was expected to bring in foreign inflows.

However, the trade numbers released by the PBS for the month of November 2021 posted a massive jump in the imports to $8 billion (up by 94 per cent MoM) during the month, taking the trade deficit to an all-time high of $5.1 billion (up by 3x MoM) causing a bloodbath in the index (marking worst single-day fall after 20 months).

This along with a more-than-anticipated CPI figure of 11.53 per cent YoY (November 2021), created panic in the market as concerns over a massive hike started brewing up in upcoming monetary policy in December 2021.

Alongside this, Pak Rupee depreciated to an all-time low of Rs176.77, which further fueled the bearish sentiment. Albeit, the market closed at 43,233 points, losing 881 points (down by 2 per cent WoW).

Sector-wise negative contributions came from i) Technology and Communication (198 points), ii) Cement (165 points), iii) Oil & Gas Exploration Companies (101 points), iv) Textile Composite (68 points), and v) Food & Personal Care Products (67 points). Whereas, sectors which contributed positively were i) Commercial Banks (59 points), and ii) Oil & Gas Marketing Companies (20 points). Scrip-wise negative contributors were LUCK (124 points), TRG (107 points), SYS (65 points), MARI (62 points) and POL (44 points). Meanwhile, scrip-wise positive contributions came from HBL (67 points), PSO (52 points) and UBL (40 points).

Foreign selling continued this week, clocking in at USD 62.8 million compared to a net sell of USD 39.2 million last week. Major selling was witnessed in Commercial Banks (USD 27.2 million) and Cement (USD 14.8 million). On the local front, buying was reported by Companies (USD 25.7 million) followed by Individuals (USD 16.0 million). Average volumes clocked in at 319 million shares (up by 21 per cent WoW) while average value traded settled at USD 90 million (up by 51 per cent WoW).