Weekly Review: stock market to move with budget expectations

KARACHI: The stock market likely to move with the news flows related to budget 2020/2021 which is scheduled to announce on June 12, 2020.

Analysts at Arif Habib Limited said that with Federal Budget announcement scheduled for June 12, 2020, the market is expected to track budget related news flow.

Whereas market performance for June 2020 remains critical as during first eleven months of current fiscal year, the index has delivered a return of +0.09 percent in Pak Rupee terms.

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 ~8.2 percent versus ~2.8 percent offered by the region.

The market opened on a positive note this week, welcoming further ease in lockdown and opening up of several businesses with Standard Operating Procedures (SOPs) in place.

Moreover, rising oil prices, with revival of economic activity internationally, kept the E&P scrips under limelight. Besides this, inflation for the month of May 2020 also declined to 8.2 percent, in line with expectations while improvement in exports on a MoM basis also relieved investors.

While anticipation of relief reforms in Budget 2020-21 also kept the sentiment alive.

However, rapid spread of COVID-19 cases and decline in foreign reserves by USD 1.67 billion being reflected in the Pak Rupee-USD parity (depreciation to 163/USD this past week) prevented the market from outperforming.

The market settled at 34,350 points, gaining 419 points (up by 1.2 percent) WoW.

Sector-wise positive contributions came from i) Commercial Banks (401 points), ii) Oil & Gas Exploration Companies (78 points), iii) Automobile Parts & Accessories (32 points), iv) Textile Composite (25 points) and Pharmaceuticals (19 points).

However, sector-wise negative contribution came from i) Fertilizer (53 points), ii) Power Generation & Distribution (30 points) and Insurance (25 points). Scrip-wise positive contributions were led by MCB (110 points), UBL (100 points), POL (66 points), HBL (66 points) and BAHL (54 points).

Foreign selling continued this week clocking-in at USD 15.3 million compared to a net sell of USD 2.4 million last week. Selling was witnessed in Commercial Banks (USD 5.0mn) and Textile Composite (USD 4.4 million). On the domestic front, major buying was reported by Companies (USD 7.4 million) and Mutual Funds (USD 6.6 million).

Average Volumes settled at 157 million shares (down by 27 percent WoW) while average value traded clocked-in at USD 39 million (down by 27 percent WoW).

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