The Pakistan Stock Exchange (PSX) Benchmark Index remained stable during August 2021 and saw a slight increase of 0.7% or 231 MOM points.
The daily average volume of KSE-100 Index fell 13.6% to 127 million shares as against 147 million shares last month, while the price of MOM fell 16% to 6.6 billion PKR. The fruit season failed to encourage investors despite solid earnings and payments.
Experts attribute this indecisiveness to rising geopolitical uncertainty surrounding Afghanistan and its possible spillover impact on Pakistan coupled with increasing international commodity prices, which could build pressure on the country’s balance of payment and inflation. Besides these geopolitical and economic concerns, rising COVID cases also portray risk as the positivity ratio remained above 7%.
Looking ahead, we hold a neutral view on the stock market primarily due to political turmoil in Afghanistan and its spillover impact on Pakistan and uncertainty related to IMF 6th review of its financial package. However, currency devaluation will bode well for export-oriented industries. At the same time, on the import front, it will increase the cost, cement and steel companies would feel the heat of rising commodity prices and their ability to pass on the impact will be tested going forward, which may set the direction of these sector’s stocks.
Moreover, the MSCI review will also dictate the market sentiment in the future