Stocks to remain under pressure on virus worries

Stocks closed another crushing week with losses pouring in from all sectors especially energy, while trade is seen mixed to negative going forward amid economic concerns arising from a second wave of coronavirus pandemic, dealers said.

Pakistan Stock Exchange's (PSX) KSE-100 shares index fell 3.9 percent or by 1,630 points in the outgoing week and closed at 40,070 points. Average volumes arrived at 391 million shares (down by 16 percent WoW) while average traded value settled at $83 million (up 2 percent WoW).

Brokerage Arif Habib Limited in a research note said, “With economic indicators continuing to show improvement, we expect the profit-taking to be short-lived”.

Furthermore, Pakistan was likely far from a second wave of the coronavirus, but turmoil in international markets might continue to suppress sentiment in the domestic bourse, brokerage added.

“Worries about uptick in local COVID-19 cases, with an average of over 600 being reported daily, kept the market turbulent, especially in the last few trading sessions,” it said.

Saad Rafi, head of equity sales at Al-Habib Capital Markets, said, “In the upcoming week the market may show a negative trend and cyclical sectors like steel and cement remain under pressure with E&P witnessing some declines due to international oil price as COVID-19’s second wave is seen hitting the demand”.

He said inflation at 9 percent was bit higher than market expectations which had ruled any possibility of further rate cut.

“The CPI for the upcoming months and balance of payment situation will decide future course of the interest rate,” Rafi said adding that the banking sector would be stable for investment in the coming week.

“A further decline in global crude prices, which have already slumped 10 percent in last two trading days, may keep the index in check, while conflict between Aremina and Azerbijian and eruption of second wave of COVID-19 may also weigh,” Rafi added.

Umair Naseer from the equity desk of BMA Capital Management said, “Fresh liquidity injections from local and foreign investors amidst soft monetary policy outlook in the near to medium term are expected to instill further optimism in equities”.

“However, we advise investors to remain cautious as we fear the resurgence of COVID-19 cases can potentially put pressure on the market,” Umair added.

Foreign investors sold equities worth $8.3 million compared to a net-selling of $10.5 million last week.

Selling was mostly centered in commercial banks ($4.2 million) and cement ($3.2 million).

On the domestic front, insurance companies ($15.4 million) and banks / DFIs ($12.4 million) were among major buyers.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said "The bloodbath at the bourse was mainly sponsored by redemption calls from institutional investors and weak corporate earnings announced during the week”.

“Domestic political temperature remained high through the week after NAB booked opposition leader, Shahbaz Shariff, in a money laundering case.”

Furthermore, ex-PM Nawaz Sharif’s statement also added to the political tension during the week, Ahmad added.

Sector-wise negative contributions came from fertiliser (190 points), cement (179 points), oil and gas marketing companies (164 points), oil and gas exploration companies (159 points), and commercial banks (157 points). Scrip-wise negative contributions were led by HASCOL (61 points), TRG (61 points), SYS (60 points), UBL (58 points) and HUBC (57 points).