PROFIT-TAKING SPOILSPORT; MONETARY, LOCKDOWN EASE AND BUDGET NEWS MAY FAVOUR MARKET.

AuthorKazmi, Shabbir H.

Byline: SHABBIR H. KAZMI

After posting a spectacular performance in the previous week (up 3.98%WoW), the market lost some of its momentum on profit-taking. The benchmark closed the week ended on 8th May 2020 at 33,268 points, down 2.47%WoW. Top gainers of the week were: SHEL, YOUW, IDYM and HMM, whereas laggards included: KTML, CHCC and SERT. Average daily traded volume for the week improved only slightly more than 190 million shares as Ramadan factor persisted. Volume leaders being: HASCOL, UNITY, MLCF and TRG. The total liquid foreign reserves held by Pakistan were reported at US$18,755.1 million on 30th April 2020. The break-up of the foreign reserves were: Reserves held by State Bank of Pakistan (SBP) were reported at US$12,329.4 million and reserves held by commercial banks at US$6,425.7 million. During the week under review, reserves held by SBP increased by US$259 million to US$ 12,329.4 million.

During the week included cement data pertaining to April 2020 indicated local dispatches declined by 19%YoY, but managed to inch up 1.7%MoM, as against this and exports plunged by 54%YoY to US$957 million during the month due to order deferrals and cancellation in face of COVID-19. The other major news flow impacting the market during the week included: 1) Pakistan's fiscal deficit declined to 3.8% of GDP in 9MFY20, as against 5% of GDP during the same period last year, 2) OGRA slashed prices of all petroleum product prices, 3) inflation for April 2020 was reported at 8.5%, providing space for further cut in interest rates, 4) Governor, SBP provided details of the impact of lockdown on GDP growth, 5) textile value chain allowed to resume operations in Punjab, 6) GoP committed to bear 40% of first loss to banks on SME loans, and 7) IPP inquiry commission put on ice for two months. With the result season not far from over, market is likely to shift attention towards monetary policy statement, where a low inflation for April 2020 offers room for further monetary easing.

Furthermore, market will continue to factor in phased easing of lockdown. Meanwhile, any news flow regarding Federal Budget FY21 may also drive the market. Local cement dispatches for April 2020 declined by 19%YoY due to lockdown restrictions, but increased slightly by 1.7%MoM as restrictions were eased for the sector. For 10MFY20, local demand has posted meager growth of 1.2%YoY. Exports from North took a significant hit, declining by 99YoY as border controls were imposed due...

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