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Stocks Review: Market to stay bullish on budget optimism

Shahnawaz Akhter

05th Jun, 2021. 06:02 pm
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Stocks Review

Stocks Review: The Pakistan Stock Exchange (PSX) is likely to remain in the positive territory next week due to optimistic budget expectations and a decline in the number of Coronavirus cases in the country, dealers said on Saturday.

“We expect the market to remain positive, with the view of a positive budget for the market scheduled for June 11. However, we cannot rule out short-term dips in the market due to COVID-19,” a report issued by a brokerage house, Arif Habib Limited, noted.

Pakistan stocks managed to close above 48,000 points this week, a level reached after almost four years, with investors weighing taxation-related budget leaks. “Declining COVID-19 cases and upward revision in growth estimates continued to fuel the positive sentiments,” Amreen Soorani, an analyst at JS Global Capital, said.

Overall, the KSE-100 shares index gained 2.3 per cent, or 1,085.41 points, to close the week ended June 4, 2021 at 48,211.70 points. KSE-30 shares index gained 1.8 per cent, or 355.17 points, to close at 19,654.65 points.
Investors’ participation held ground where though average volumes declined 9.4 per cent to 1.12 billion, the average value of traded securities increased 8.3 per cent to $192 million.

The report further said the market was mainly fuelled by the expectation of favourable budgetary measures for the capital market, and for economic growth under the FY22 budget. “Likewise, tax revenue collection hit a historic high of around Rs4.143 trillion during 11MFY21, further fuelling the market. Additionally, inflation clocked in at 10.87 per cent, lower-than-expected.”

Stocks Review

Meanwhile, Arab Light prices inched up 2 per cent during the week, settling at $70.87/bbl, which helped fuel the performance of exploration and production (E&P) scrips. Foreign portfolio investors offloaded $0.2 million worth of securities during the outgoing week, compared to a net inflow of $2.1 million last week. Foreign selling was witnessed in E&P stocks ($2.7 million) and power generation and distribution (2.4 million).

On a sector-wise basis, engineering with a gain of 9.6 per cent; autos, 6.6 per cent; and oil and gas marketing companies, 6.3 per cent were the key outperformers. Refineries, with an increase of 6.1 per cent, also beat the benchmark index over expectations that the refinery policy will be announced soon, while the rally in the cement sector, up 3.2 per cent, can be attributed to anticipation of strong sales growth during May 2021.

Over the weekend, the government completed the payment of the first instalment of Rs 89.2 billion among 20 Independent Power Producers (IPPs), according to Adviser on Petroleum and Energy Tabish Gohar, the government intends to resolve the longstanding issue of circular debt on a permanent basis.

Stocks Review:

The Finance Division has completed this transaction in coordination with relevant organisations and departments, including the State Bank of Pakistan (SBP) and the Power Division. Among significant news during the week, the central bank’s Monetary Policy Committee kept the interest rates unchanged at 7 per cent; Fitch rating forecast expects Pakistan’s growth to stabilise at 4 per cent in the next fiscal year; the country’s exports surged 14 per cent to $22.6 billion in 11MFY21, while merchandise trade deficit in May 2021 ballooned 134 per cent.

The KSE-100 is currently trading at a PER of 7.1x (2021), compared with the Asia Pacific regional average of 16.6x while offering a dividend yield of 6.8 per cent versus 2.6 per cent offered by the region.

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