January 19, 2020 (MLN): The KSE-100 index lost nearly 39.29 points during the week, and closed at 43,167 level, i.e. lower by 0.09 percent in comparison to the previous week's closing of 43,207 points.
The trading remained highly dull throughout the week, with minimal participation seen from the market participants and investors. While profit-taking activity can be blamed partially for this mediocre performance, a research report by Arif Habib says that fears of high inflation also kept the investors' sentiments at bay.
During the week, Commercial banks made the highest contribution to the benchmark index with a gain of 109 points, while sectors such as E&P, Power Generation and Insurance Companies pulled the index down by a total of 191 points.
Company wise, MEBL (+32), HBL (+28), THALL (+25), BYCO (+21) AND HMB (+18) captured the highest gains, whereas OGDC (-57), HUBC (-46), DAWH (-37), POL (-31) AND COLG (-29) emerged as the losers during the week.
Likewise, the All-Share Market Index declined by $26.6 million during the week, before settling at $52.3 billion.
Foreign investors were the net buyers during the week, with the total purchase of securities being recorded at $28.8 million. Amongst these investors, Foreign Corporates emerged as the largest group of buyers as they purchased securities worth $3.06 million.
On the contrary, local investors were the net sellers, with Insurance Companies and individual investors making the largest sale at $2.83 million and $2.19 million respectively.
Forex Roundup:
PKR continued to appreciate against the Dollar on the back of improving economic indicators, with the currency gaining 26 paisa during the outgoing week.
The Pak Rupee closed the week at 154.57, which is the strongest it has been since June 13, 2019. The rupee has appreciated by 46 paisa during the last three weeks and 27 paisa since the start of 2020.
With the Current Account Deficit reducing by 75 percent, largely due to shrinking import payments, and improved inflows of dollar courtesy of remittances and foreign investment in Govt. T-Bills & PIBs, the pressure on the Rupee will continue to be low in the short term.
Fixed Income:
Yields in the secondary market remained relatively unchanged during the week with the only notable movement being a decline of 9 bps in 3 month yields.
With the MTB auction witnessing bids mostly in the 3 month paper the market’s expectation that the upcoming monetary policy committee meeting shall maintain interest rates at the current level was evident.
There has been no respite from inflation with the SPI, released by PBS on a weekly basis, showing a YoY increase of over 20 percent.
A note from AKD research was quick to point out “Although weak economic activity and an improving external account position merit some easing action, the MPC of the central bank (scheduled to meet later this month) with its singular focus on inflation will not move the needle until it gets comfortable with the inflation outlook. The recent price trends coupled with upside risks to inflation outlook have further dampened early easing prospects, in our view. Moreover, the materializa-tion of upside risks to inflation could delay easing cycle beyond 1HCY20.”
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