KSE100: Week 49-2020 Closing Notes - Pessimistic Cycle Breaks!

KSE100 finally gives a break out of it range bound cycle, takes a solid support from 40700 +/- 200 and finally closes above 41900 +/- 200 meeting our breakout benchmark! Weekly gains stood at +1400 points or +3.43%. Now all the green grass belongs to the bulls while the bears are gone into their winter hibernation. For the curious mind, real bears go into hibernation during winter. (source-1). Looking forward to the week ahead, we expect the rally to keep going forward with some see-saw behavior expected due to exchange of hand within sectors. The hurdle at 43000+/- 300 remains in place. A sustainable break from here would probably create a new high somewhere in the range of 44300-44700. We are not blindly optimistic given the fundamental barriers explained below. 

 

Perhaps there is nothing more jaw dropping about the out going week other than the whopping capitalization gains over a short span of five trading sessions. Weekly average gains clocked in at +232.60 billion/PKR. But thou shalt not exercise greed! Computation of capitalization data also demonstrates that it is approaching its exhaustion range which falls approximately at 8000 billion/PKR. A value which has been a strong rejection point twice in the past. To create a new high, index must also break this exhaustion barrier and attract higher inflows.

Events which may influence the capital markets are PIB auction on  09, 16, 30 Dec. MTB auction on 16, 30 Dec. State Bank of Pakistan has set itself an ambitious target to raise 4.155 trillion/PKR debt in next three months by auction (source-2). Given the large amount of money and short time span, this could seriously hamper money flow into equities. We urge to exercise caution!