KSE-100 Monthly Review: February’s Slow March

March 1, 2021 (MLN): The KSE-100 index lost around 520 points during the month of February and closed at 45,865-mark i.e. around 1.12% lower as compared to the closing of the previous month.

Finally breaking a three-month long winning streak, the benchmark index succumbed to the pressures brought by FATF plenary review meeting, volatility in oil prices, announcement of corporate earnings, and several other factors.

Commercial Banks delivered the most disappointing performance during the month, as lower than expected results, coupled with no change in the stance of Monetary Policy Committee with regards to Policy Rate, kept the sector under pressure. The biggest blow to the sector was given by HBL, as its dividends didn’t match up to the expectations of investors, as well as MEBL, as its financial performance was not up to the mark.

According to a report by Spectrum Securities, Oil and Gas Marketing Companies came under pressure as delay in the payment of circular debt continued to shake investors’ confidence in the sector. Likewise, Power Generation Sector took away 109 points owing to a delay in the settlement of agreement in the presence of NAB enquiries against some IPPs delayed the payments.

Another major driving factor was the meeting that took place between IMF and Pakistan, wherein both the parties reached a staff level agreement on the previously suspended USD 6 billion Extended Fund Facility (EFF). The impact of it on the index was brief and investors quickly became concerned regarding the FATF Plenary Review, the outcome of which failed to lift confidence as Pakistan retained its position in the grey list.

While several economic as well as political factors came into play to bring an end to a three-month rally, the month did see some blissful days wherein the benchmark index showed unprecedented gains. Cement sector, in particular, performed exceptionally as it went on to contribute 638 points to the benchmark index on account of better financial performance of key players as well as higher demand. Similarly, Oil and Gas Exploration Companies contributed 99 points owing to increase in the international price of oil.

Other positive factors that limited the uncertainty caused by corporate earnings and FATF was the Current Account Deficit, which once again shrunk by nearly 55% YoY to USD 229 million after the country reported a 12% decline in imports. Further respite came from inflow of remittances by overseas Pakistanis, which saw an increase of 19% YoY to USD 2,274 million during the month of January.

Moreover, Pakistan saw a Foreign Investment of USD 240.6 million during the month of January, i.e. nearly 19% higher as compared to the previous month but 85% lower as compared to the same month of last year. With regards to Direct Foreign Investment, the country saw an influx of $192.7 million as compared to $193.6 million in the previous month and $219.6 million in the same month a year ago.

On political front, Pakistan and India agreed to address each other's core issues and concerns, which have propensity to disturb peace and lead to violence. The two not-so-friendly neighbors reviewed the situation along Line of Control and all other sectors in a free, frank and cordial atmosphere, and agreed for strict observance of all agreements, understandings and ceasefire along the LoC and all other sectors.

Sector-wise, Commercial Banks, Oil & Gas Marketing Companies, Power Generations & Distribution, Engineering, and Food & Personal Care Products emerged as the worst performers during the month, as they took away around 811, 129, 109, 79, and 74 points respectively from the benchmark index. In particular, the scrips of UBL (-104), MCB (-91), BAHL (-79), NBP (-73), and DAWH (-61) turned out to be the most disappointing ones.

During the month, 29 companies traded in green while 71 landed in the red zone. The All-Share Market Cap declined by nearly USD 546.3 million to USD 51.9 billion, i.e. 1.04% lower than the previous month. In terms of PKR, the All-Share Market Cap dropped by Rs. 191.3 billion to Rs. 8.2 trillion, i.e. 2.28% lower as compared to the last month.

Figures released by NCCPL showed that foreign investors sold a net USD 6.18 million worth of stocks during the month with foreign corporates doing the bulk of selling @ USD 18.25 million. This was majorly offset by purchasing of stocks worth USD 10.90 million by Overseas Pakistanis.

On the local front, Individual investors purchased USD 33.69 million worth of stocks, followed by USD 22.87 million worth of stocks bought by Local Companies. Other significant transactions included USD 18.04 million and USD 12.21 million worth of stocks sold by Insurance Companies and Banks/DFIs respectively.

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Posted on: 2021-03-01T14:33:00+05:00