KARACHI: Stocks snapped two-week losing streak in the outgoing week and recovered 620 points (1.5 per cent) to close at 40,807. There was nothing fascinating that turned the tables on bears, but investors “churning” shares with most engaged in day trading and switching quickly from one to the other sector. That turned out bumper average daily traded volume that shot up by 63pc week-on-week to 280 million shares.
The spike in new Covid-19 cases that jumped to 3,000 a day — almost four times after several months and high daily death rate spooked investors who avoided taking long positions as they feared imminent lockdowns; cut in business and industrial activity with their impact on the corporate bottom lines.
The closure of educational institutions, limiting business timings and ban on indoor gatherings, lent credence to that fear. But prime minister’s categorical announcement that economy would not be shutdown, instilled some confidence in the market.
The appreciation in the value of the rupee against the dollar and growth in the State Bank’s foreign exchange reserves, which surged by $484m to reach $13.4 billion were also major positives.
Early in the week, investors were attracted to the index-heavy exploration & production stocks: Oil and Gas Development Company, Pakistan Petroleum and Pakistan Oilfields which had sunk to attractive levels.
The global markets also spiked with Dow Jones Industrial Average scaling past the 30,000 level for the first time ever. Investors’ sentiments were boosted by the news flow that promised an early arrival of Covid-19 vaccine with 94pc efficacy rate. Money managers started to re-rate the equities as they reckoned that the world economies would be able to stave off the blow of a slowing growth. That sparked a rally in international oil prices.
On the last day of the week, E&Ps at the Pakistan market fell out of favour ahead of the OPEC+ meeting where oil-dependent economies were thought to disagree over the production cut.
Some market men were also crediting the early week rally to the SBP decision to keep policy rate unchanged at 7pc for the next two months. They said that the rejuvenation in energy stocks owed itself to the recommendations of dividend-based formula to be used to clear the outstanding circular debt. The appreciation of the rupee against the dollar and the SBP’s forex reserves rising to over $13bn were major positives.
On the flip side, investors were worried over the International Monetary Fund asking for hike in electricity and gas tariffs to resume talks on the IMF programme.
Foreign investors continued to sell-off equities, amounting to $9.3m in the outgoing week Among local participants, companies were major buyers of shares valued at $3.4m and insurance companies adding $2.9m worth shares to their portfolio.
Sectors other than E&P that helped fuel the market rally included technology & communication, vanaspati & allied industries and automobile parts & accessories. Meanwhile, oil and marketing companies and automobiles were the laggards. Among scrips, those that helped in the index upsurge included technology stocks TRG Pakistan, Systems Ltd, coupled with Pakistan Oilfields and Lotte Chemical. Scrips that were dragged the Index down included Fauji Fertiliser Bin Qasim Ltd, Frieslandcampina, IGI Holdings Ltd, and Sui Northern Gas Pipelines Ltd.
Going forward, gurus visualised the market to perform on developments over several variables; the deterioration or improvement on the Covid-19 cases; the government keeping its promise of no more complete lock downs of business and factories that could hurt the economy and the strengthening of the rupee against the dollar.
The global crude oil price movements would also go to determine the market direction and so would the progress over the talks with IMF and the government’s nod to take unpopular decisions of hike in electricity and gas prices.
Published in Dawn, November 29th, 2020