Pakistan Strategy: Markets catch a cold, but still far from a fever, (AKD Daily, Mar 02, 2020)
AKD Daily
Pakistan Strategy: Markets catch a cold, but still far from a fever
- Continuing the depressed start to CY20 seen from mid Jan, Feb’20 was when inflation momentum at home (and alignment to delayed loosening) coupled with exigent external risks (perceived FATF hard-handiness, IMF staff agreement delay, growing spread of NCOV-19) ended a five month rally for the KSE-100, closing lower by 9.4%MoM (biggest down move in 30 months)
- Volumes took a tumble as well, with KSE-100/All average traded volumes falling 32.2/37.4%MoM, while value traded during the month tumbled 31%MoM to US$40.9mn as investor seek refuge in mainboard scrips (KSE-100 share of ready market volume at 74.6% vs. 68.8/60.6% in Jan’20/Feb’19)
- FPI outflows strengthened pace, with Feb’20 recording net sell of US$56.4mn (highest since Nov’18), where Insurance (US$55.6mn), Trusts public funds & Others (US$13.5mn) and Individuals (US$7.8mn) were net buyers, where the last week of the month garnered significant position building (FPI net sell and insurance net buy for the week were ~40% of monthly cumulative)
- Sectoral performance meandered, with mainboard E&Ps (-17%MoM), OMCs (-16%MoM), Power (-10%MoM), Fertilizers (-6%MoM), Banks (-5%MoM) and Cement (-4%MoM) driving the index lower, with only two sectors (Textile Spinning and Leasing) managing to close the month in the green
- Soft inflation reading of 12.4%YoY in Feb’20 - which came in significantly below market consensus of 13.3%YoY, albeit in line with our estimate – could shift easing expectations, leading to brief rally. In the medium term, all eyes are set on the IMF Executive board deliberations (expected early Apr’20), which will set medium term macro policy framework.
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