Weekly Review: market to move on policy rate decision, IMF visit

KARACHI: The stock market will move with the outcome of monetary policy announcement scheduled for Monday September 16, 2019 and expected visit of a delegation of International Monetary Fund (IMF) next week.

Analysts at Arif Habib Limited said that the monetary policy committee is scheduled to convene on Monday September 16, 2019 and it is expected that the State Bank of Pakistan (SBP) to announce a 25 basis points cut which should relieve levered sectors such as Cements, Steel and select Automobile and Oil Marketing Companies.

In addition, the staff-level delegation of the IMF is expected to visit Pakistan next week to review the county’s economic performance and any development in this regard will have implications for the stock market.

Whereas, Prime Minister Imran Khan is scheduled to travel to Saudi Arabia on September 19, 2019 to discuss the Indo-Pak tensions over Kashmir.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 5.6x (2020) compared to Asia Pac regional average of 13.1x and while offering DY of ~9.8 percent versus ~2.4 percent offered by the region.

The analysts said that the incumbent government adopted a stringent monetary policy in the past year to fix external imbalances but with good, comes the bad; this also dampened domestic demand and added to the companies’ financial woes.

Albeit, the market demonstrated a stunning rally in the outgoing week with market participants anticipating a cut in the State Bank of Pakistan’s benchmark policy rate, post rebasing of CPI.

Moreover, buying by certain provincial funds also garnered positivity at the index. The market closed at 31,481 points (up by 1,014 points / 3.3 percent WoW).

Sector-wise positive contributions came from i) Commercial Banks (270 points), ii) Oil & Gas Exploration Companies (213 points), iii) Fertilizers (196 points), iv) Power Generation & Distribution (95 points), and v) Cement (86 points). Scrip-wise positive contributions were led by PPL (122 points), OGDC (89 points), LUCK (84 points), UBL (75 points) and FFC (72 points).

Foreign buying was witnessed this week clocking-in at USD 1.01 million compared to a net sell of USD 5.32 million last week. Buying was witnessed in E&P (USD 1.4 million) and Cement (USD 1.0 million).

On the domestic front, major selling was reported by Individuals (USD 4.8 million) and Banks / DFIs (USD 4.5 million). Average Volumes settled at 130 million shares (up by 39 percent WoW) while average value traded clocked-in at USD 38 million (up by 70 percent WoW).

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