PSX ended the week on a weak note. KSE100 Index lost 200 points about 0.5% on the last day of the trading week after having shown a strong upward move of +800 points yesterday.
KSE100 Index closed at 43653 for the week. Down 2.02% since last week. In first two days of the week KSE100 Index lost close to 3.78%, as Mutual Funds sold massively betting on worsening Ukraine crisis and national politics. Scheduled MPC on 2nd day of the week may also have prompted Fund's selling as rates in the secondary market were indicating a slight hike in policy rate. But in my opinion Funds have almost exhausted selling and are not facing much redemption pressure. The strong move up in the second last day of the week reflects that.
Selling from 'foreigners' was already largely over. In general PSX is in oversold state. Going forward PSX may find its own footing after having absorbed close tp $440mn of foreign selling last year. Had it not an eventful week both on national as well as international level, we would have a somewhat positive market performance as price level remains attractive on good cooperate results and very low multiples.
In fact inflation, higher exchange rates, is now acting as barrier to entry in many industries. The true value of existing capacities is not being reflected in market price. This 3rd year of the Government was also expected to be year of consolidation having seen worst period and having successfully negotiated the recent IMF program. Structural issues however remain and changing international scenario in terms of of higher commodities especially energy prices may make economy handling challenging.
This week was marked by international and national events that will reshape political and economic landscape. Ukraine crisis unfolded this week, making speculators going berserk on commodities prices as wide spread economic sanctions on Russia were imposed. Brent topped $130 giving further impetus to inflation. The recently released US data on inflation for February show inflation at 40 years high level while energy prices increase in March so far still have to make its way through the system. Although commodities have eased in last two days but the situation remains in a high state of flux.
On national level no-confidence motion was submitted against the PM. That too adds another dimension of uncertainty for market outlook.
So far the corporate results and low multiples of the PSX is drawing a line for PSX to hold.
Monetary Policy Committee (MPC) of State Bank of Pakistan held its scheduled meeting this week. MPC decided to keep Policy Rate on 9.75% without any change although rates in money market warranted an increase. The MPC statement however indicated that MPC might meet earlier than scheduled if situation on account of Ukraine crisis so required. But the market was relentless. On subsequent day in TBill auction yields shot up 96 to 130bps.
Foreign remittances figures for the month of February were encouraging - were $2.19bn as per State Bank of Pakistan showing 3% decline yoy but 2% gain since last month.
Rupee remains under pressure.