Stock Review.

Byline: Shabbir Kazmi

Index retains rally as no reflect of political development observed

Pakistan Stock Exchange (PSX) retained momentum during the week ended 1st November 2019, gaining 2.14%WoW to close at 34,338 points after remaining under pressure in the backdrop of FATF developments and application of 'minimum brokerage commission'. Average daily trading volume improved to 166.3 million shares, up 33.5%WoW. Top performers included CHCC, PIOC, DGKC, ASTL and PSO, while laggards were HASCOL, NCL, FFC, MEBL and OGDC.

Market was driven By: 1) resolution of issues between the government and traders, 2) decline in PIB yields raised expectation of an early interest rate cut, 3) delay in implementation of axle load policy for one year and 4) expectation of revision in OMC margins. Further impetus was provided by surprises in result: PSO posting higher inventory gains, HUBC receiving higher capacity payments and share of profit from CPHGC and PAEL registering low inventory costs and manageable debt levels, higher than expected results reinvigorated sentiment.

The market did not give much attention to the on-going 'Azadi March'. Participation wise, Companies and Mutual funds emerged net buyers absorbing selling by foreigners, Banks and Insurance. Apart from OMCs and Cements, major performances were witnessed in Power, on possible issuance of Power Sukuk by year-end or early part of next year, and Commercial Banks, on the flipside Textiles witnessed selling on weak earnings announcements. Analysts believe market performance over the short-term could be dictated by the developments surrounding the 'Azadi March' and news flow relating to IMF review. Focus on inflation numbers for October 2019 can shape expectation of interest rate cut, through monetary policy announcement due later in November.

October 2019 can be termed a month of two halves, introduction of minimum brokerage commission by Pakistan Stock Exchange resulted in decline in volume by 41% to 144 million shares in the second half and benchmark index remaining flattish during second half, as against 6.2% gain in first half. FATF's decision to keep Pakistan on grey list till February 2020 further dampened the market sentiments and kept the investors on sideline. Meanwhile, developments on the local political landscape - the 'Azadi March' - added to the market volatility. Overall, benchmark index returned 6.6%% during the month, closing at 34,204 points, while the average daily trading...