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Weekly Review: PSX may remain under pressure due to coronavirus

Weekly Review: PSX may remain under pressure due to coronavirus

KARACHI: The share market may remain under pressure due to coronavirus spread and reports of lockdown in major cities of the country.

Analysts at Arif Habib Limited expect the equity bourse to remain under pressure on account of fast spreading Coronavirus and news regarding lockdown of major cities (Karachi and Lahore) which will keep the investors sentiment dull.

On the other hand, foreign selling in both, the equity market and debt securities, may keep the local currency under stress.

However, improvement witnessed on macroeconomic front, with the Current Account Deficit (CAD) shrinking by 71 percent YoY in first eight months of current fiscal year along with decline in international oil prices and lower inflation forecast, should bode well for overall economy in the medium term.

The benchmark KSE-100 of Pakistan Stock Exchange (PSX) is currently trading at a PER of 5.7x (2020) compared to Asia Pac regional average of 10.2x while offering a dividend yield of around 9.0 percent versus around 3.1 percent offered by the region.

The KSE-100 index took a heavy battering with the market recording its largest weekly decline of 5,393 points (points wise largest in history and in percentage terms largest decline since December 2008).

Trading began on a negative note this week with manifestation of the unstoppable Coronavirus Pandemic in Pakistan and across the globe which triggered an investor stampede.

Whereas declining international oil prices also caused panic amongst market participants as witnessed in a rout in global equities.

Albeit, local investors anxiously looked forward to the announcement of the monetary policy this week whereby the State Bank cut its benchmark policy rate by a meagre 75 basis points against higher expectations (hence met with a disappointing reaction at the index) with other countries also jumping on the bandwagon of swift monetary action.

As a result, the benchmark KSE-100 index closed at 30,667 points, down by 15 percent WoW and witnessing trading halts on 4/5 days.

Contribution to the downside was led by i) Commercial Banks (1,484 points), ii) Cements (729 points), iii) Oil and Gas Exploration Companies (537 points), iv) Power Generation and Distribution (424 points), and v) Fertilizer (408 points). Scrip wise major losers were HBL (372 points), UBL (366 points), LUCK (361 points), HUBC (334 points), and MCB (264 points). Whereas, scrip wise major gainers were PAKT (9 points), and IBFL (2 points).

Foreigners offloaded stocks worth of USD 20 million compared to a net sell of USD 23 million last week.

Major selling was witnessed in Commercial Banks (USD 6.0 million) and Cements (USD 5.0 million).

On the local front, buying was reported by Insurance Companies (USD 23.5 million) followed by Individuals (USD 19.5 million).

That said, average daily volumes for the outgoing week were down by 10 percent to 239 million shares likewise value traded decreased by 33 percent to USD 55 million.