KARACHI: The stock market remained highly volatile during the outgoing week as investors’ sentiments remained hostage to news flow over the global and local devastation caused by the Covid-19 pandemic.

The heated political situation ahead of the elections in Gilgit-Baltistan on Nov 15 also kept investors on risk-off market mode. The KSE-100 index stepped down by 167 points (0.4 per cent) for the week to settle at 40,569.

The local bourse started the week on a positive note with news of Joe Biden winning the US elections was celebrated by investors in line with much of the global markets. The bulls returned with a vengeance on Tuesday over the Pfizer’s announcement of its discovery of the Covid-19 vaccine with 90pc effectiveness. The euphoria caused globally saw Dow Jones jump 3pc and S&P rise 1pc on the Wall Street.

Also, the international oil prices surged by a glowing 10pc in a day. The local market also saw excited investors in a buying mode with the index taking a leap of 369 points.

However, the euphoria proved to be short-lived as the realisation sank in that the availability of the vaccine was months away. On the other hand, the ravages caused by the pandemic in the international markets saw countries moving to lockdowns.

The worrisome rise in infection cases in Pakistan which peaked to 6.2pc on Thursday — the highest level in 110 days — sent the authorities into unprepared and random lockdowns and early closure of restaurants and shops. With worries of a second wave of Covid-19 on their minds, investors remained unimpressed by the improvement in economic indicators such as the continuing rise of the rupee against the dollar; current account surplus of $792 million during 1QFY21; massive rise in remittances to over $2bn for the fifth consecutive month in Oct’20; LSM growth at a 4.81pc during Jul-Sep’20 and improvement in foreign exchange reserves to $19.9b billion.

The early week gains were neutralised in the fourth session when the index plunged 633 points on alarm over the rising Covid-19 cases and its possible negative impacts on the economy and market.

Foreign investors continued to quit with sell-off amounting to $7.4m against net sale of $5.5m the preceding week. Outflow was noted from commercial banks in the sum of $3.7m and cements $2.7m.

On the domestic front, individuals were major buyers of stocks worth $7.5m, followed by banks with net buying valued at $3.3m. Investor participation sharply declined with average daily volumes at 290m shares (down 21pc week-on-week) while average value also fell 16pc WoW to $66m.

During the week, sector-wise, oil & gas exploration remained top performer on rising international oil prices. Other gainers were commercial banks, up 83 points and technology 34 points.

On the flip side, cements led the laggards with a dip of 161 points due to increasing coal prices and lower dispatches. Other sectors that were battered during week included oil & gas marketing companies, down 72 points and power generation and distribution 61 points.

Scrips that dragged down the index included Lucky Cement, losing 76 points and Hub Power Company 34 points. The Sui Northern Gas Pipelines Company Ltd was down by 35 points over key development where the Oil and Gas Regulatory Authority significantly reduced the company’s Unaccounted for Gas on RLNG.

Going forward, the market is likely to remain volatile, moving on the back of news flow. The improvement in some vital economic indicators such as the current account surplus, foreign exchange reserves touching $20bn and mainly the appreciation of the rupee against the dollar could keep investors sentiments upbeat.

However, the local and global economy hinges on the Covid-19. Pakistan’s exports and currency strength could be compromised by the continuing rise in global infections. Investors may also be inclined to skip out into principal protected, safer investment avenues in case of more local lockdowns that may eventually lead to economic slump and hit on corporate profitability. Inflation continues to remain one of the principal concerns.

Published in Dawn, November 15th, 2020