Weekly Review: Stock market likely to stay in green zone

KARACHI: The stock market likely to stay in green zone during next week as coronavirus cases are receding and investors are optimistic on inflows from international financial institutions.

Analysts at Arif Habib Limited said that the market to remain positive in the upcoming week.

Since COVID-19 cases have started to decline day-on-day basis, investment sentiment is expected to improve. With inflow of funds from ADB and World Bank, PKR/USD parity is expected to stabilize in the upcoming week.

With monetary policy announced we expect investors to cherry pick scrips from Cements, OMCs and Fertilizers sector.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.2x (2020) compared to Asia Pac regional average of 12.6x and while offering DY of ~6.5 percent versus ~2.8 percent offered by the region.

The market commenced on a positive note this week. However, sentiments turned negative amid plunge in international oil prices during the mid-week.

Furthermore pressure from downturn in international markets owing to concerns over a possible second wave of COVID-19 was also felt in local bourse.

With monetary aid received during the week from ADB and World Bank worth USD 1bn followed by current account turning surplus with USD 13 million in May 2020, sentiments shifted towards green side.

Along with this, SBP’s announcement of 100 bps cut provided further fuel to sentiment. Furthermore, extension in FATF’s deadline also provided breather to investors.

The market settled at 33,939 points, gaining 501 points (up by 1.5 percent) WoW.

Sector-wise positive contributions came from i) Fertilizer (326 points), ii) Cements (108 points), iii) Power Generation & Distribution (46 points), iv) Oil & Gas Marketing Companies (34 points) and Auto Assemblers (31 points).

However, sector-wise negative contribution came from i) Commercial Banks (90 points), ii) Tobacco (13 points) and iii) Pharmaceuticals (8 points). Scrip-wise positive contributions were led by FFC (101 points), ENGRO (95 points), DAWH (78 points), EFERT (47 points) and HUBC (44 points).

Foreign selling continued this week clocking-in at USD 9.9 million compared to a net sell of USD 4.8 million last week. Selling was witnessed in Fertilizer (USD 2.7 million) and Commercial Banks (USD 2.6 million).

On the domestic front, major buying was reported by Insurance Companies (USD 7.0 million) and Mutual Funds (USD 3.4 million). Average Volumes settled at 177 million shares (down by 23 percent WoW) while average value traded clocked-in at USD 35 million (down by 16 percent WoW).

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