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The tone of PSX bullishly inclined as KSE-100 index recovers 2.1% WOW
Summary

The movement of KSE-100 Index during the week had the tendency for upward flow as it ultimately brought the Index from 39,000 level to 40,000 touching all-time high of 41,000 to finally close on Friday at 40,731.61.

The added affecting factor for the PSX this week was US election. There was consensus view that Donald Trump victory could give the market boost, while it may sink in case of victory of his opponent.

Already the scare over rising cases of Covid-19 supported by the officially released figure together with the warning of the second wave of pandemic already into the country. However, National Coordination Committee decided that there would be no lockdowns even in the event of increased new Covid-19, which the investors were reluctant to believe. The recovery boosted the confidence of investors: The rupee gathering strength against the dollar; the uptick of 2.1 percent in exports during October; the government effort to resolve circular debt; October inflation eases slightly to 8.9 percent; Banks deposits rising by 20 percent in October; rising international oil prices with oil sales up by 6 percent in July-October 2020-21 and the power relief package granted by the government.

During the week KSE-100 Index gained 843.61 point to close on Friday at 40,731.61. The average volume was 368 million shares and the market capitalization increased by Rs.138 billion to close at Rs7.537 trillion. The foreigner remained net seller by $5.5 million.

The market impact of last week Friday close when market lost 1,298.86 points continued on Monday when the KSE-100 Index shed 775.82 on coronavirus second wave, which was announced by the government last week. The Index closed at 39,112.18 and the volume too declined to 322 million.

Spectacular rally of 1,368 took place on Tuesday on economic optimism as it was the highest in six months since April. The KSE-100 Index crossed 40,000 to close at 40,480.88. The volume too increased to 384 million. Positive statements regarding economy was given by prominent business and industrial leaders.

On Wednesday, profit-taking took place and the Index shed 198.92 points to close at 40,281.96. The volume too surged to 428 million shares.

The market rebounded by 789 points as foreigners turned buyers on Thursday. There was an inflow of $1.67 million by foreigners who otherwise remained seller throughout the week. The KSE-100 Index closed at 41,071.30.

Finally on Friday there was consolidation in PSX and the KSE-100 Index shed 339.69 points to close at 40,731.61. The market was affected by uncertainty in local political climate, reaction of oil and commodity market after announcement of US election and the daily increase in Covid-19 cases.

Participants/Activity

On average shares of 396 companies were traded. Of these 200 were gainers and 180 were losers and 16 remained unchanged.

Foreigners were net seller $5.5m during the week; companies were seller by $0.61m, Banks were buyer $0.37m; Mutual fund net seller $2.11m, Insurance buyer $3.63m and Individual buyer $5.37m.

Triggers

— Record cement offtake in October as construction activity picks up. Cement sector registered highest-ever monthly despatches of 5.73 million tonnes in October compared to 4.98 m tonnes in the same month last year.

— ADB to give $10bn in fresh assistance to Pakistan over the next five years to speed up economic recovery process.

— The country’s exports have maintained a growth trend to pre-pandemic level, Commerce Adviser Razzak Dawood disclosed.

— SBP reserves up $61m to $12.18 billion on October 29.

— Govt raises Rs.373bn from T-bills, PIBs. The auction trend of T-Bills indicating that investors are expecting a change in the interest rates as they parked their max. liquidity Rs.238.5 billion in three-month T-bills at 7.15 percent.

— Bank deposit rise by 20 percent in October.

— October inflation eases slightly to 8.9 percent.

— NCC rules out complete lockdown.

–Major power tariff relief for industries.

Conclusion

Overall it seems that Pakistan economy is moving towards recovery as government is controlling the situation economically as well as politically with the opposition strength weakening. The result of US election will further decide the fate of the market as regional and international market do affect PSX. The Covid-19 result will further challenge the government and it has to be seen if the KSE-100 Index break the pre-Covid-19 Jan 12 high of 42,218 points.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research & Training (Pvt) Ltd, Karachi.
Dated: November 07, 2020

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