Pakistani stock market finished the outgoing week 236 points up to settle at 38,220 points – a figure which does not aptly reflect the volatility that marred the Pakistan Stock Exchange.

With the total number of coronavirus cases in Pakistan rising to six, and the continuous rise in cases outside China (close to 20,000 now), the trickle-down effect of a global-sell off in equities create pressure in the index.

Inflation figures eased to 12.4% from 14.6% in the previous month, providing a much-awaited respite for the investors as expectations of a cut in the interest rates rose. The development created a positive sentiment in cyclical sectors, thus inviting buying interest.

Furthermore, on the international front, Asian shares also regained a measure of calm as investors pinned hopes on a likely coordinated global monetary response to help soften the economic blow of the coronavirus outbreak.

However, the positive momentum could not be sustained as the index retreated to the red zone amid profit-taking by investors. The significant improvement in trade deficit also failed to spur any buying action at the bourse. This trend continued as uncertainty in global equity markets and persistent selling by foreign investors pulled the index further down. Moreover, outflow of hot money also sparked concern among investors and dented overall sentiments.

The falling bond yields and speculations of a rate cut in the central bank’s monetary policy once again fuelled a bullish rally at the PSX. Trading volumes and value soared as market participants resorted to across-the-board share trading. Once again the bull-run was short-lived as the index bled in the last trading day of the week, losing over 1,100 points in line with the turmoil in global markets.

The situation on the international front was also bleak as the number of people infected with coronavirus across the world surpassed 100,000 as the outbreak reached more countries and the economic damage intensified. Business districts began to empty and stock markets tumbled.

Brent slid to its biggest daily loss in more than 11 years on Friday after Russia balked at OPEC’s proposed steep production cuts to stabilize prices hit by economic fallout from the coronavirus, and OPEC responded by removing limits on its own production. US West Texas Intermediate crude dropped $4.62, or 10.1%, to $41.28, its lowest close since August 2016 and the largest daily percentage loss since November 2014.

With investors fleeing risk assets, haven investments gold and the yen surged as the World Health Organization (WHO) warned that the epidemic must be taken seriously. At the close of trade, the Paris stock market was down by 4.1%, Frankfurt dived 3.4%, London shed 3.5% and Milan tumbled 3.7% in a fierce global markets selloff that began about two weeks ago. Wall Street stocks also suffered another bruising session, with petroleum producers and banks especially hard-hit, as the S&P 500 ended down 1.7%.

At the PSX, average volumes remained stable at 243 million shares while average value traded was up 35% to clock-in at $65 million.

In terms of sectors, negative contributions came from banks (down 388 points) led by expectations of a rate cut this month, power generation and distribution (49 points) and miscellaneous (10 points). Positive contributions came from cement primarily (up 329 points). “The sector outperformed the KSE-100 index by 12%, where news of 34% year-on-year growth in dispatches in February 2020 and rumours of potential price increase greatly benefited sector performance,” a JS Research report stated.

Scrip-wise, negative contributions were led by HBL (119 points), UBL (71 points), and BAFL (54 points) while positive contributions were led by LUCK (113 points), and DGKC (51 points).

Foreign selling continued this week clocking-in at $16.7 million compared to a net sell of $22.5 million last week. Selling was witnessed in cement ($5.1 million) and E&P ($3.5 million). On the domestic front, major buying was reported by mutual funds ($15.4 million) and companies ($11.1 million).

Farzana Shah

Farzana Shah is editor @ Global Conflict Watch. She is a Journalist/DEFENSE & Cortex analyst, Geo Strategic & Geopolitical Affairs commentator with special focus on militancy along Pak-Afghan border region, terrorism and Indo-Pak relations. She is based in Peshawar and is recipient of International Award in Journalism. Furthermore, she has contributed to significant national/ international newswires on regional / domestic geopolitics, security and threats. She tweets @Jana_Shah.