Investors dumped shares at the Pakistan Stock Exchange in the outgoing week as mounting Covid-19 cases and a spike in international commodity prices triggered a sell-off, however, the rebasing of economy provided some respite and eased concerns.

During the week ended on January 21, 2022, the benchmark KSE-100 index dived 745 points, or 1.8%, to close at 45,018.

“The market remained under pressure throughout the week, witnessing the biggest decline on Thursday,” said JS Global analyst Wasil Zaman.

The week kicked off with a slide in the KSE-100 index. The market remained bearish in the first four sessions of the week primarily because of a surge in Covid-19 infections, which signaled the potential imposition of lockdowns and suspension of economic activities in the country. Such fears forced the investors to divest their stockholdings.

Market players adopted a dump-and-run strategy, believing fresh Covid-induced measures from the government could dent the overall economy.

In addition to that, the lack of positive triggers that could give direction to the market restrained the KSE-100 index from posting gains.

Furthermore, market talk relating to redemption by mutual funds fueled bearish sentiment and sparked across-the-board profit-booking.

Market players also remained cautious ahead of the monetary policy announcement, scheduled for Monday. Although the market expected the central bank to maintain the status quo, the investors rushed to safeguard their positions ahead of any surprise change in monetary policy.

Persistent depreciation of the rupee against the US dollar, throughout the week, also aided the stock market’s decline. Although the currency was far from the all-time low, its depreciation took a toll on the stock trading environment.

On the international front, oil prices kept on climbing, touching their highest level since 2014. The stock market panicked over the development as it expected further swelling of imports and deterioration of the current account deficit.

Buoyed by the rebasing of Pakistan’s economy, the bourse turned bullish in the final session as the KSE-100 index staged a rebound. Market participants made fresh buying following the upward revision in the country’s economic growth rate to 5.4%.

The government rebased the economy from fiscal year 2005-06 to 2015-16, which expanded the size of the economy, propped up growth rate and reduced public debt.

“Investors should remain cautious in the upcoming week as the monetary policy committee is meeting whereas inflationary pressure is set to rise in the backdrop of swelling commodity prices,” cautioned a report of Arif Habib Limited.

“Moreover, talks with the International Monetary Fund are expected to resume on January 28, which could have a positive impact on the market.”

During the week under review, average daily traded volumes dropped 43% week-on-week to 201 million shares while average daily traded value fell 17% week-on-week to $42 million.

In terms of sectors, negative contribution came from technology and communication (241 points), commercial banks (96 points), cement (69 points), refinery (65 points) and fertiliser (63 points).

On the flip side, sectors which contributed positively were oil and gas exploration (36 points), power generation and distribution (7 points) and Real Estate Investment Trust (6 points).

Stock-wise negative contributors were TRG Pakistan (239 points), Cnergyico PK (31 points), MCB Bank (23 points), Dawood Hercules (22 points) and PSO (21 points).

Meanwhile, stock-wise positive contribution came from Kapco (30 points), Mari Petroleum (24 points) and Bank AL Habib (23 points).

Foreigners were net sellers during the week as they sold $2.09 million worth of shares compared to net buying of $0.53 million in the previous week.

Major selling was witnessed in oil marketing companies ($1.4 million) and technology and communication ($1 million).

On the local front, buying was reported by individuals ($12.4 million), followed by banks ($5.9 million).

Published in The Express Tribune, January 23rd, 2022.

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