KARACHI: The outgoing week was marked by high volatility, mundane trading, lack of investor interest and low volumes as sentiments remained dampened by uncertainties in the absence of positive triggers. The KSE-100 index gave up 382 points, or 0.94 per cent, closing the week at 40,187.

Investors were majorly spooked by the rising cases of Covid-19 infections globally which also spilled over into Pakistan. As the number of daily new infections increased four-fold in a month with average positivity rate going up to 6.7pc from 5.6pc the preceding week, the government had to review its earlier claim of no lockdowns and clamped smart/micro lockdowns in major cities. The investors worried over the negative impact on the economy. The week also saw a short-lived euphoria around the world on announcement by pharma firm Pfizer and Moderna separately claiming to have developed vaccine against Covid-19 with efficacy between 94 to 95pc.

Other events that prevented investors from taking long positions included the political uncertainty over the opposition alliance rallies which the government vowed to prevent from taking place against the other party’s determination to go on with the jalsas as planned. The Gilgit-Baltistan elections ended with the ruling PTI beating the other two major patties, PML-N and the PPP.

On the economic side, international oil prices remained volatile throughout the week as supply cut was favoured by Opec. The country posting current account surplus for the fourth consecutive month, improving foreign exchange reserves, remittances and foreign direct investment did little to elate investor confidence in the economic health of the country.

Foreigners continued to sell-off equities amounting to $6.6m in the outgoing week compared to a net sale worth $7.4m the preceding week. Outflow was witnessed from commercial banks ($4m) and Cement ($2.1m). Among local participants, individuals supported the market by acquiring shares of $6.5m, followed by corporates who bought equities worth $4.3m.

Sector-wise negative contributions came from fertilizers (94pts), oil and gas exploration companies (81pts), and cement (67 points).

Positive contributions to the index was made mainly by the banking scrips as UBL contributed 55 points and Meezan Bank 55 points.

Going forward, investors are likely to remain cautious as the political temperatures soar with the government and the opposition alliance at cross purposes over the rallies being held in various cities. The rising cases of Coronavirus would be of major concern as it could lead to more lockdowns and serious repercussions for the economy. High inflation could also drive away investors.

The consensus expectations of a no change in SBP monetary policy to be announced on Monday could go wrong in case of a surprise decision. It would also require re-rating of some sector stocks. Although high inflation could dampen sentiments, further appreciation of the rupee against the dollar and improved outlook for corporate profitability in upcoming quarter could induce long term investors to accumulate value stocks at dips.

Published in Dawn, November 22nd, 2020