KSE-100 Review - a futile lockdown, desperate rate cuts, and a disappointing outcome

June 1, 2020 (MLN): The departed month of May saw minimal activity from investors despite the partial lifting of the lockdown by the government and the additional cut in the policy rate by 100 bps by the State Bank of Pakistan.

This subdued performance of the benchmark index can be attributed to the fewer trade timings owing to the month of Ramadan, followed by the long trail of Eid holidays. Moreover, the major portion of the month was subjected to lockdown restrictions by the government, which further contributed to its misery.

It is pertinent to note that the easing in lockdown by the government was expected to lift market sentiments to some extent, however, the easing came just a few days ahead of Eid, i.e. by the end of the month so it was obvious that the impact of it on the stock markets would be insignificant.

Furthermore, the drastic increase in the cases of COVID-19 cases in Pakistan damaged economic activity considerably, resulting in several local companies reporting enormous losses or simply shutting down operations. It may be relevant to note that Pakistan, at this point, is standing at the 18^th spot in terms of the highest COVID-19 cases across the world, just behind China.

A prominent factor that merely helped in boosting market activity is the announcement of budget for the Fiscal Year 2021, which according to the analyst reports, is likely to focus on mulling tax reliefs. However, is it being held that this move is being opposed by the International Monetary Fund, which still wants Pakistan to adopt additional tax measures.

As a result of the aforementioned factors, the KSE-100 index lost around 180 points during May and closed at 33,931-mark i.e. nearly 0.53% percent lower than the closing of the previous month i.e. 34,111 points.

The benchmark index was led down by the performance of sectors such as Commercial Banks, Fertilizer, Power Generation, Cement, and Textile, as they looted the index by 444, 130, 121, 92 and 28 points, respectively.

On the other hand, E&P Companies, Technology & Communication, Food, and Personal Care,  Pharmaceuticals emerged as the best performing sectors during the month, as their contribution to the benchmark index amounted to 206, 154, 98, 92, and 57 points, respectively.

Company-wise, the scrips of OGDC, NESTLE, TRG, EFUG, and MARI were the most desirable ones as they contributed 132, 118, 112, 53, and 40 points, respectively. On the contrary, the shares of HUBC, ENGRO, MCB, BAHL, and UBL took away 130, 113, 111, 96, and 92 points, respectively.

Figures released by NCCPL showed that foreign investors dumped USD 39.9 million worth of stocks during the month, with foreign corporates doing the bulk of the selling at USD 45.2 million.

On the local front, Individual Investors picked up USD 41.1 million worth of stocks, the highest amongst its peers. On the other hand, Mutual Funds and Banks/DFIs sold approximately USD 9.7 million and USD 8.9 million worth of stocks over the month.

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