KSE-100 Monthly Review: August and Everything After

September 1, 2020 (MLN): After a sharp ricochet of 14.05% witnessed in July 2020, the KSE-100 index extended its winning streak in the month of August by posting a return of 1,852 points i.e. up by 4.72% as compared to the previous month.

The benchmark-index was allowed entry beyond the 41,000-mark for the first time in so many months, courtesy of economic growth and recovery. The month of July saw a Current Account Surplus of $424 million, thanks to the massive improvement in remittances and exports from Pakistan, the impact of which was very much visible in the performance of the stock markets.

The victory was further led by deteriorating cases of COVID-19 in the country, for which, Pakistan received its due appreciation across the globe. Other factors that came into play later during the month include the contract between the Government and IPPs pertaining to the circular debt clearance.

Besides the abovementioned events, the KSE-100 remained subjected to other not-so-incredible factors that at some point during the month, pushed the index towards the red zone. These factors include the verdict given by the Supreme Court on GIDC, which did not go in the favor of the industries at large and the fertilizer sector in particular. As a result of this judgment, the industries which include Fertilizer, Cement, Textiles, Steel, and Chemicals, are now required to pay a sum of Rs. 457 billion.

Amidst all this hullabaloo, the index finally ended on an extremely praise-worthy note as the improvement in cement offtake, increase in fertilizer prices, growth in the reserves held by State Bank of Pakistan, and the approval of the ML-1 Railway up-gradation project combatted any negative sentiment that may have arisen throughout the month.

During the period under review, most of the points were brought in by Commercial Banks (+397), Cement (+293), Oil & Gas Marketing Companies (+208) and, Textile Composite (+190), whereas the Fertilizer Sector (-215) emerged as the one that took away the maximum points from the index.

To be specific, the scrips of HBL (+197), COLG (+123), UBL (+121), TRG (+117) and, HUBC (+103) accounted for the most points gained during the month, while the shares of ENGRO (-109), MCB (-59), EFERT (-47), FFC (-43), and BAFL (-36) turned out to be the most disappointing ones.

During the month, foreign investors observed net buying worth $6.84 million, with Overseas Pakistanis doing the maximum purchasing at $10.65 million. Foreign Corporates, however, sold securities having worth of $3.88 million.

On the local front, significant net selling of $36.6 million was observed amongst Insurance companies, followed by Banks/DFIs which sold securities worth $27.6 million. On the other hand, local individuals purchased securities worth $59.14 million.

The KSE All Share Market Cap improved by $2.33 billion, from $43.68 billion to $46.02 billion, demonstrating growth of 5.35%. Moreover, 77 companies ended their monthly run in the green, whereas 22 ended up in the red district.

Outlook

Going by the analysis of various brokerage houses, it is certain to some extent that the positive momentum shall carry on to the next month as well, as the country will witness another wave of economic growth, fewer COVID-19 cases, as well as the fact that investors will choose equity as their preferred medium of investment anyway as current yields on fixed-income securities are quite low. However, the performance will also largely depend on the outcome of the Monetary Policy Meeting, which is expected to take place this month.

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