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AKD STOCK SMART, Mar 20, 2020

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Weekly Review                                

KSE-100 started the week with a massive selloff and increased concerns over growing cases of COVID-19 around the world. Commodities also witnessed a slide on the back of decreasing demand projections whereas ongoing tussle between global oil players also took a toll on oil prices. That said, slight rebound was witnessed towards tail-end of the week as investors went after cheap valuations. Consequently, KSE-100 closed the week at 30,667pts, down 14.5%WoW. Foreign investors continued with the selling, in-line with the global sell-off, as net FIPI outflow stood at US$19.6mn for the week taking c. MTD outflow to US$59.3mn. Major news flow driving market sentiment included: i) State Bank of Pakistan (SBP) reducing its policy rate by 75bps to 12.5% while announcing two new measures to provide subsidized credit to industry to help meet challenges posed by the growing pandemic, ii) Moody’s Investor Service decreasing its forecast for Pakistan growth rate to 2.5% for the current fiscal year owing to Covid-19, iii) Petroleum Division initiating a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalization of transmission and distribution costs, iv) Pakistan’s current account deficit (CAD) shrinking by 71.0% to US$2.84bn during 8MFY20 compared to US$9.82bn in the corresponding period last year, and v) Government considering an “economic emergency bailout package” within a week to address the likely short-to-medium term liquidity crunch to various sectors of the economy. KSE-100 average traded volumes during the week was down 9.5%WoW to stand at 239.2mn shares with stocks generating large volumes during the week included: i) BOP (122.3mn shares), ii) KEL (79.1mn shares), iii) MLCF (67.4mn shares), and iv) UNITY (57.7mn shares). Laggards amongst our coverage universe were: i) PIOC (down 32.2%WoW), ii) NML (down 32.2%WoW), iii) NCL (down 29.8%WoW), iv) CHCC (down 27.2%WoW), and v) PAEL (down 26.9%WoW).

 

Outlook

Going forward, market is going to be dominated by how the situation regarding COVID-19 evolves particularly after Pakistan witnessed first three deaths during the outgoing week. On the other hand, increase uncertainty over international commodity prices, particularly oil, can keep the market jittery. The only respite can appear from the economic package government is mulling however any disappoint on that front can put market under severe pressure.

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