MASSIVE SELLOFF WITNESSED, UNCERTAINTY ON COVID-19 FEAR TO PERSIST.

Byline: SHABBIR H. KAZMI

T he week ended on 20th March 2020 started on a massive selloff and increased concerns over growing cases of coronavirus around the world. Commodities also witnessed a slide on the back of decreasing demand projections whereas ongoing tussle between global oil players also took a toll on oil prices. That said, slight rebound was witnessed towards tailend of the week as investors went after cheap valuations.

Consequently, the benchmark index of Pakistan Stock Exchange (PSX) closed the week at 30,667 points, down 14.5%WoW. Foreign investors continued with the selling, in-line with the global sell-off, as net FIPI outflow rose to US$19.6 million for the week taking. Month-to date outflows were reported at US$59.3 million. Average daily trading volume declined by 9.5%WoW to 239.2 million shares during the week. The scrips generating large volumes during the week included: BOP, KEL, MLCF and UNITY, while laggards were: PIOC, NML, NCL, CHCC and PAEL. As PSX continue to witness erosion in value, the Securities and Exchange Commission of Pakistan (SECP) on Thursday notified amendments in the base minimum capital (BMC) requirements, believing that it would support the market players. The move has been made to extend liquidity to brokers.

Besides, such measures will give a positive message to the investors too that the regulator was concerned about the situation. The PSX Stockbrokers Association has expressed skepticism regarding the move saying the relaxation of 60 days to deposit exposures against the client's assets under broker's custody will only benefit the large players.

Major news flow driving market sentiment included:

1) State Bank of Pakistan (SBP) reducing its policy rate by 75bps to 12.5%, while announcing two new measures to provide subsidized credit to industry to help meet challenges posed by the growing pandemic,

2) Moody's Investor Service decreasing its forecast for Pakistan growth rate to 2.5% for the current fiscal year,

3) Petroleum Division initiating a process of consultation to consider reduction in allowable UFG benchmarks along with reduction in return on assets and rationalization of transmission and distribution costs,

4) Pakistan's current account deficit (CAD) shrinking by 71.0% to US$2.84 billion during 8MFY20 compared to US$9.82 billion for the corresponding period last year, and

5) Government considering an "economic emergency bailout package" within a week to address the likely...