Political arena, court hearings to lead PSX trends during upcoming week

LAHORE

The Pakistan Stock Exchange (PSX) is expected to remain range bound next week amid thin activity as investors will keenly follow developments of the domestic political arena besides accountability court hearings of the ruling family and Finance Minister Ishaq Dar, experts believe.

Talking to Pakistan Today the experts showed their major concerns of potential delays/slippages in remedial measures to address growing external account weakness due to current political environment and change in guard in the economic management team as major alarming factors. In this context, the comment from the rating agency in connection with Pakistan’s upcoming $ 1 billion Sukuk remains important and can be a source of market volatility, they added

Investors would be looking for hints at likely measures to support the weak balance of payment situation. They anticipate levels through a focus on the beneficiary of the textile export package and likely correction in currency while IPPs, textile, E&Ps, banks, and fertilizer sector may continue to remain in focus.

The trading pattern this week at PSX stayed tainted by sluggish built-around, lack of triggers, coupled with political noise stemming out of hearings of the ruling family in accountability courts and concerns over the sustainability of macroeconomic framework.

Resultantly, the benchmark KSE100 Index took a dip of 341 points to close the week at 42,409 points level. In addition, the factor risk once again emerged with the Supreme Court issuing a decision against National Bank of Pakistan (NBP) in its case on Rs 47.7 billion pension liability. Other sector-specific news included 4 per cent rise in Brent crude prices, 16 per cent hike in Middle East urea prices and notice by Pakistan Oilfields Ltd on the potential find in Jindial Block.

The same was reflected in the performance of the fertilizer, banking sectors, and POL. Other major sectors to close positive were beverages +11 per cent and fixed-line telecommunication while cement and industrial metals & mining landed in negative territory. Activity levels at the bourse also slowed down and tilted towards 2nd tier and 3rd tier stocks as evident from 14 per cent and 31 per cent drop in ADT and ADTV to 146 million shares and $ 59 million, respectively.

Foreign investors mopped up scripts of $ 5 million during the week where most of the buying was focused on commercial banks which were of $ 7.6 million and cements for $ 3.5 million, whereas oil & gas exploration sector that touched $ 10.4 million following fertilizer with $ 0.7 million sectors witnessed outflows.

On the macro front, SBP announced its monetary policy and decided on keeping the policy rate stable for the next two months, largely in-line with market expectations. Furthermore, total foreign exchange reserves of the country dipped by $ 48 million during the week to $ 20 billion.

Experts believe that any further drawdown below the psychological barrier of $ 20 billion might exert renewed pressure on the local currency in the open market.

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