Equity:
The KSE-100 index gained merely 771 points in the departed week and closed at 40,029-mark i.e. nearly 1.96% percent higher than the closing of the previous week.
“The market commenced on a positive note given further decline in COVID-19 cases post-Eid ul Adha. However, bears took over after higher than expected inflation of 9.30% was reported. Although this was short-lived as the market rebounded the very next day amid release of cement offtake data for Jul’20, depicting a stunning jump of 41% YoY followed by a decline in the trade deficit (by 15% YoY in Jul’20) and surge in SBP’s foreign reserves (by USD 567mn on weekly basis). Moreover, approval of key projects (ML-1 Railway up-gradation worth PKR 11.44tn under CPEC by ECNEC along with 4 projects by CDWP worth PKR 16.1bn) kept the momentum strong”, Arif Habib Limited stated in its weekly report.
Commercial Banks and Cement emerged as the best performing sectors during the week, as they contributed about 219 and 198 points respectively to the benchmark index. Company-wise, the scrips of HBL, TRG, LUCK, DAWH, and PIOC was the most desirable ones as they contributed 79, 65, 60, 45, and 43 points, respectively.
Figures released by NCCPL showed that foreign investors purchased USD 3.72 million worth of stocks during the week, with overseas Pakistanis doing the bulk of the purchasing.
On the local front, Individual Investors sold USD 41.1 million worth of stocks, while USD 29.3 million and USD 11.8 million worth of stocks were sold by Insurance Companies and Mutual Funds respectively.
Forex:
The trend for PKR reversed as it not only lost the gain it had made in the previous two weeks but an additional 55 paisa during the outgoing week to the US Dollar.
The 10-day volatility decreased slightly from 4.11% to 3.39% as the dollar was traded in a range of 168.60 (Bid) and 166.70 (Ask) and closed at 167.87
Data released by the State Bank of Pakistan showed that Pak Rupee's Real Effective Exchange Rate Index (REER) decreased by 4.3 percent in June 2020 to a provisional value of 93.02 from the revised value of 97.20 in May 2020.
A note by Ismail Iqbal Securities on the subject read “Near term outlook of an external account is not daunting due to limited current account deficit and persistent foreign debt flows, while REER is also close to all-time lows, thus we believe chances of any major currency depreciation are low in the short term.”
Money Market:
Higher than expected inflation pushed the yields up even further as 3, 6, and 12-month rate increased by 12, 17, and 21 basis points while longer-term bond yields were up significantly more with 3, 5, and 10-year yields up 29, 36 and 23 bps.
According to data released by the SBP, bond trades seem to have completely dried up in the secondary market as no trades were reported by the SBP since July 22, 2020.
Bond yields have gone up 72, 85, and 73 basis points for 3, 5, and 10 years in FY21.
Bank’s borrowing for the central bank continued as the SBP injected Rs.1,100 billion on Aug 03, 2020, for 4 days and Rs.1,228 billion for 10 days on Aug 07, 2020.
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