Continuing the momentum gained in the latter part of last
week, the benchmark index of Pakistan Stock Exchange (PSX) closed the week ended
on 3rd April 2020 at 31,622 points, posting 12.5%WoW gain. It was the highest
ever in points gain, (up 3,512 points WoW) and highest weekly gain in
percentage terms since February 2000, outperforming other global equity
benchmarks on weekly basis. Across the board attractive valuations, cabinet
approval of the stimulus package announced last week and kick-start of
essential industries in the coming week (another incentive package for Construction
sector announced on Friday) aided investor sentiment in tandem with encouraging
news flow regarding number of recoveries from coronavirus. For the week top gainers
included: ASTL, CHCC, MLCF, PIOC and KAPCO.
As a result, average traded volume jumped to 227.7 million
shares, from 150.0 million shares traded a week ago. Within main board items,
Cements led the show, gaining 26.0%WoW on expectation of the construction
sector incentive package and news flow suggesting initiation of construction
activities at Diamer Bhasha dam. It was followed by E&Ps/OMCs gaining
15.7/23.2%WoW, on Brent price rising more than 30% in anticipation of deal between
Saudi Arabia and Russia. Flow wise, net buyers were Individuals (US$13.0 million),
Mutual Funds (US$10.3 million), and Insurance (US$9.0 million), mostly
absorbing sale by foreigners (US$36.1 million).
On the international front, global institutional investors
continue to sell despite undemanding valuations driven by redemption pressures
across both active and passive investment strategies. At the same sovereign
allocators of global capital are also calling in redemptions due to calls for
support from respective governments to fund relief measures as economies face
various levels of impacts due to the virus outbreak. A fresh round of allocations
may only be likely over the medium to longer term as economies only gradually
reopen within the backdrop of large scale stimulus programs launched by central
banks. Stimulus programs will eventually translate into higher risk tolerance
improving allocations towards frontier and emerging markets.
Analysts advocate buy-and-hold investment strategy with a
long term investment horizon since the impact of coronavirus outbreak is yet to
be completely gauged. They also suggest continuing to monitor data regarding
the virus, testing capacity augmentation, provincial measures to mandate social
distancing (including length and severity of lockdowns.