The Pakistan Stock Exchange (PSX) is unlikely to escape the bumpy ride this week and stocks are at a major risk of underperforming on back of rising coronavirus cases, lockdown fear, reduced business timing, and extended Eid holidays starting this weekend, besides political instability.
Another factor that can put pressure on stocks is an increase in the Consumer Price Index-based inflation, which surged by 11.1 percent on a year-on-year (YoY) basis in April 2021 as compared to an increase of 9.1 percent in the previous month. On a month-on-month basis, it increased by 1.3 percent in April as compared to an increase of 0.3 percent in March.
On the other hand, the Federal Board of Revenue (FBR) collected net revenue of Rs3,780 billion during the first 10 month of the current fiscal year, exceeding the target of Rs3,637 billion by Rs143 billion. This represents a growth of about 14 percent over the collection of Rs3,320 billion during the same period last year.
Again, the last four sessions remained bearish and it was only the Monday session when the benchmark KSE-100 index surged nearly 1,000 points with vital support coming from upbeat economic numbers. Keeping the four red candle sticks and strong buying from brokers to the tune of $2,755,335 on Friday last in mind, there is a hope that the market may perform in green or losses will be in control. Again, the prices of most of the shares in cement, bank, oil and gas marketing companies, oil and gas production companies, steel and other sectors are already very attractive
Analysts at Arif Habib Limited said that the National Command and Operation Center (NCOC) had instructed stricter restrictions and shorter working hours, while a complete lockdown is still a possibility. This could potentially continue to add pressure to the market next week.
The ongoing third wave of the novel coronavirus is likely to keep sentiment under pressure, while in addition to a strong results season (particularly cyclical sectors) we may see the market react on a positive note in the upcoming week, they said.
The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 6.6x (2021) compared to Asia Pac regional average of 16.0x while offering a dividend yield of 7.4 percent versus 2.6 percent offered by the region.
The week commenced on a positive note on Monday due to heavy investment from a major fund. For the remainder of the week the index was under pressure due to rise in the infection ratio, lockdowns in certain areas of the country and reduced business timings.
Finally, a discussion of a possible complete lockdown is still on the cards which added extra pressure to the index. On a positive note, inflows to foreign exchange through the Roshan Digital Account (RDA) crossed $1 billion last week, while the Current Account posted a nominal deficit of $47 million for March 2021. The KSE-100 Index closed the week at 44,262 points, declining 445 points on a week-on-week basis.
In terms of sectors, contribution to the downside was led by technology and communication (110 points), cement (95 points), tobacco (555 points), engineering (49 points) and automobile assembler (43 points). On the other hand, sectors that contributed positively included textile composite (25 points) and chemical (16 points).
Scrip-wise, major losers were TRG Pakistan (82 points), MCB (65 points), Pakistan Tobacco Company (55 points), NBP (39 points) and International Industries (31 points), meanwhile, positive contributors were led by HBL (48 points), BAHL (36 points), Fauji Fertilizer (34 points), Colgate-Palmolive (31 points) and UBL (24 points).
Foreigners turned net sellers last week as they offloaded stocks worth $13.13 million compared to a net buy of $7.3 million last week. Major selling was witnessed in commercial banks ($4.8 million) and technology and communication ($1.5 million). On the domestic front, buying was reported by other organisations ($16.1 million) followed by mutual funds ($13.4 million).