Weekly Review: Turmoil in international markets likely to suppress domestic bourse

Weekly Review: Turmoil in international markets likely to suppress domestic bourse

KARACHI: The share market likely to remain under pressure due to turmoil in international markets, analysts said.

Analysts at Arif Habib Limited said that with economic indicators continuing to show improvement, they expect the profit-taking to be short-lived.

So far Pakistan seems to be far from a second wave of the coronavirus.

However turmoil in international markets may continue to suppress sentiment in the domestic bourse.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.3x (2021) compared to Asia Pac regional average of 13.8x and while offering DY of ~6.3 percent versus ~2.7 percent offered by the region.

The market commenced on a negative note this week given profit taking by investors. Bearish momentum further turned into bloodbath after arrest of prominent opposition leader Shahbaz Sharif on Monday.

The sentiment remained lackluster given fear of protests by opposition parties. The market briefly gained some respite after ADB approved USD 300 million for supporting development of capital markets followed by the Pak Rupee appreciating to 164.51 against USD.

However, this was short lived as a mini lockdown was imposed in certain areas of karachi due to rising cases. Moreover, fall in international oil prices by 7 percent during the week exerted pressure on the oil and gas exploration and production scrips.

Furthermore, after announcement of US President being tested positive for COVID-19 on last day of the week, international markets witnessed selling pressure (which was also observed at KSE-100 index as well). The market settled at 40,071 points, shedding 1,630 points (down by 3.9 percent) WoW.

Sector-wise negative contributions came from i) Fertilizer (190 points), ii) Cement (179 points), iii) Oil and Gas Marketing Companies (164 points), iv) Oil and Gas Exploration Companies (159 points), and v) Commercial Banks (157 points). Scrip-wise negative contributions were led by HASCOL (61 points), TRG (61 points), SYS (60 points), UBL (58 points) and HUBC (57 points).

Foreign selling continued this week clocking-in at USD 8.3 million compared to a net sell of USD 10.5 million last week. Selling was witnessed in Commercial Banks (USD 4.2 million) and Cement (USD 3.2 million). On the domestic front, major buying was reported by Insurance Companies (USD 15.4 million) and Banks / DFIs (USD 12.4 million). Average volumes arrived at 391 million shares (down by 16 percent WoW) while average value traded settled at USD 83 million (up by 2 percent WoW).