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Market Outlook_Cometh the Vaccine!, (AKD Daily, Nov 10, 2020)

AKD Daily

Market Outlook: Cometh the Vaccine!

• Global markets gave a big hurrah over news of Pfizer Inc’s experimental COVID19 drug being more than 90% effective on initial trial results. Of the major markets, the DJIA closed up 2.95%; FTSE100 up 4.67% and the DAX up 4.94%.
• That said, markets pared intraday gains where DJIA’s closing at 29,158 points was down 540 points from its intraday high, while futures at the time of writing this report are down another 193 points.
• Not surprisingly, while global markets soared, the tech heavy NASDAQ remained under pressure, closing –ve1.5% amid a perception of successful vaccine bringing normalcy and hence, brick and mortar model back in play.
• At home, taking cue from global markets, we believe the KSE-100 is likely to give a knee jerk positive rebound where commodity play should be the theme. In the immediate term, index heavy Oil & Gas sector should provide momentum with Brent at USD41.7 and WTI at USD39.4. With coal up 2.6%, Cements may potentially witness some pressure, however, is likely to be mitigated by impressive volumetric outlook. In line with global performance, Tech sector may witness some pressure while improved export outlook courtesy vaccine availability early on in the US and Europe may keep Textiles buoyant.
• That said, on the external front, we remain cautious on the math unraveling (~5% rise in core import/oil commodity prices would expand CAD by ~USD1.0/0.35bn)
• Over the medium term, market outlook may remain patchy as COVID19 continues to make headlines. Though market is unlikely to replicate performance of Feb’20-Mar’20 (index reached 27,229 points with P/E falling to 5.2x), COVID positivity ratio reaching 5.1% as per NCOC highlights the gravity of the situation, the ramifications of which cannot be ignored.

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