Bargain hunters all set to grab attractive valuations

Stocks lost around six percent or 2,159 points last week as oil plunge and virus spillover weighed down values of index movers, and dealers are now looking forward to rate cut and cherry-picking that could bring back the lost shine.

“Going forward, global markets are likely to remain under pressure on account of lower oil prices and concerns over coronavirus,” brokerage BMA Capital Management said.

“While lower oil prices are likely to be a big positive for the Pakistan’s economy it may keep index heavyweights under pressure on lower profitability outlook.”

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index saw a bloodbath during the outgoing week, losing 5.64 percent or 2,159 points week-on-week to close the week at 36,061 points.

The market participation saw an increase where average daily turnover clocked in at 264 million shares, up 43 percent over the previous week, while average daily trading value rose to $80.52 million, up 53 percent.

Dealers said coronavirus outbreak badly bruised the sentiment of the investors. Resultantly, there was a hefty thrashing of share prices with KSE-100 index tumbling on fear of economic slowdown globally.

“With panic and uncertainty looming over the extension of coronavirus, global markets are yet to ascertain long term impact,” brokerage Arif Habib said. “International markets have fallen significantly from their all-time high levels whereas the local index has already undergone major correction prior to spread of the virus.”

The brokerage said announcement of monetary policy in the coming week remains a key event for the market, “where we expect the SBP to cut the benchmark rate by 50 to 100bps (basis points), which can be a positive trigger for the bourse”.

“That said valuations across the board particularly in blue-chip scrips have reached attractive levels,” it said.

The international oil market crashed after Russia disagreed to participate in a proposed supply cut. Instead, all oil producers including Saudi Arab and Russia vowed to boost crude output sending oil prices into a bottom-less pit. Brent lowered 29 percent week-on-week to settle at $35/barrel.

Foreign selling continued this week, clocking in at $23 million compared to a net selling of $16.7 million last week. Selling was witnessed in cements amounting to $8.2 million and exploration and production ($6.2 million). Rupee depreciated against the US dollar mainly as a result of net foreign selling in government securities.

“We advise investors to take the current dip as a buying opportunity with the mayhem seen across global markets especially in the wake of lower commodity prices spelling good fortune for Pakistan, providing a much-needed impetus to an economy reeling from high inflation and pressures on the external account,” brokerage Habib Metro-Financial Services said.

The major cause of concern for traders was the increasing number of virus cases globally, which resulted in a lockdown and travel restrictions in various countries. The meltdown seen across global stock markets reverberated at the local bourse further fueled by a sharp contraction in the price of crude oil internationally.

However, yields exhibited a notable drop of 133 basis points, 84 basis points and 66 basis points in recent auction of treasury bills of 12, 6 and 3 months. Moreover, the central banks of numerous countries have announced monetary easing in attempts to support equity markets In Pakistan, the monetary policy is scheduled to meet in the coming week and the market expects a cut in the policy announcement.

Sector-wise negative contributions came from banks (706 points), oil and gas exploration companies (650 points) and fertilisers (317 points). Positive contributions came from pharmaceuticals (35 points).

Scrip-wise, negative contributions were led by Pakistan Petroleum Limited (262 points), Habib Bank (177 points), and Engro (167 points), while positive contributions were led by Searl (30 points) and Indus Motors (20 points).