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PSX faces tough week amid Covid, Sindh lockdown

FILE PHOTO: Workers clean a glass facade of the Pakistan Stock Exchange (PSX) building in Islamabad, Pakistan December 3, 2018. REUTERS/Faisal Mahmood/File Photo

KARACHI: A recent surge in Covid-19 cases and lockdown in Sindh may dent investors’ confidence and the Pakistan Stock Exchange (PSX) is likely to witness volatile sessions; however, ongoing result season may help some equities perform sideways.

According to analysts, the investors should adopt the sell on strength strategy in the upcoming week. “Going forward, we expect the market will remain volatile,” they opined. “In the light of the Covid concerns, we recommend investors to adopt a buy on dips strategy in the banking, textile and fertilizer sectors,” they said.

According to them, with the result season commencing, and cyclical expected to post a robust jump in the earnings on a yearly basis, given a nationwide lockdown was enforced in the second quarter last year, certain select stocks might come under limelight next week. “Karachi is set to observe a more stringent lockdown in place this week to contain the highly contagious delta variant of the novel coronavirus, and it appears the market may remain upward sticky in the short-term,” they said.

On the regional level, major stock markets in Asia closed the week with massive losses. Last week, the Asia Dow lost 0.62% and Nikkei 225 fell 0.96%, while Hang Seng and Shanghai plummeted 4.97% and 4.3%, respectively, amid the Chinese government’s crackdown on tech companies for monopolistic practices and data security.

The benchmark KSE-100 Index shed 737.78 points (-1.54 percent) last week to close at 47,055.29 points. The index remained under pressure for most of the week, closing in red in four out of the five sessions.

The fertilizer sector outperformed the benchmark index over better-than-expected margins and strong overall expectations. Overall, the investors’ participation remained healthy, as average daily volumes went up 28 percent to 405 million shares/day and the value of traded securities surged 14 per cent to $81 million/day for the outgoing week.

The foreigners offloaded stocks worth $5.4 million, compared with the net selling of $21.02 million last week. The major selling was witnessed in commercial banks ($2.94 million) and all other sectors ($2.56 million). On the local front, buying was reported by banks ($6.3 million); followed by the mutual funds ($2.43 million).

During the week, the Monetary Policy Committee decided to keep the policy rate unchanged at 7 percent to facilitate economic growth in line with the general expectations of the market. Moreover, the International Monetary Fund (IMF) revised upwards Pakistan’s growth forecast to 3.9 per cent for FY21. With regard to the Extended Fund Facility (EFF), discussions are still underway between the government and the IMF on the sixth review of the programme.

Sector-wise, cements came under heavy battering throughout the week, representing loss of 212 points followed by commercial banks 178 points; oil and gas exploration companies 58 points and pharmaceuticals 53 points. Scrip-wise leading the laggards were LUCK (118 points), TRG (62 points), MCB (60 points), PSO (45 points), and HBL (44 points).

Going forward, investors foresee the market trend between hope and apprehensions. The strict lockdown put in place by the Sindh government would inevitably result in disruption of business and industrial activities. Though increased Covid vaccinations are a positive sign, the uncertainty could keep investors off the market at least in the earlier part of the week.

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