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Stock Smart Weekly (Nov 27, 2020)

StockSmart                       

Weekly Review                                

The KSE-100 began the week with negative sentiment with government mulling over measures to contain rising cases of COVID-19, hinting a complete lockdown. To add, IMF hinting at government’s need to undertake unpopular measures (electricity and gas rate hikes, targeting higher tax collection, etc) to resume the IMF program further dampened the sentiments. Monetary policy announcement of interest rates maintained at 7% in scheduled MPC meeting, despite negative real interest rates, resulted in some exuberance among investors. A rise in international oil prices on the back of mass availability of vaccines in 2021 brought interest in index heavy weight E&Ps in the remaining trading sessions, where profit taking in the last trading session pared some of the gains. KSE-100 index thus closed the week at 40,807 points, up 1.54% during the outgoing week. Average daily turnover during the week also increased 63.4% WoW to 279.8mn shares. Major newsflow during the outgoing week included: (i) Pakistan secures $800m in debt relief from 14 members of the richest club of G-20 countries, as it still awaits ratification by remaining six countries, (ii) IMF talks focus on renewed tax thrust, (iii) Covid compels govt to shut educational institutions again, (iv) Policy rate kept unchanged at 7%, (v) IPPs refuse to accept Rs400bn proposed payment in three installments, (vi) government hints at increasing power, gas tariff in phases, and (vii) SBP’s forex reserves cross $13bn mark. Top performers in the outgoing week were, i) TRG (+15.9%WoW), ii) SYS (+10.9%WoW), iii) POL (+9.2%WoW), iv) PSX (+9.1%WoW), and v) LOTCHEM (+7.7%WoW), whereas laggards were, i) FCEPL (down 3.7%WoW), ii) IGIHL (down 4.2%WoW), iii) FFBL (down 4.9%WoW), iv) GATM (down 6.2%WoW), and v) SNGP (down 7.0%WoW).

 

Outlook

 

Developments on the IMF program resumption front (timing and scale of measures would be of utmost importance), the COVID-19 situation in home-ground (positivity ratio has increased to 7% vs. 4% in early Nov’20) and global crude oil price movements (OGRA scheduled to meet on 30th Nov-1st Dec’20) are likely to sway the market sentiments, going forward. Resurgence in energy prices remain double edged sword, where interest in energy chain and banking sector likely to continue.

AKD Research