Pakistan stocks expected to remain in green territory next week

KARACHI: The benchmark KES-100 index gained around one per cent in the outgoing week ended August 6, 2021, and analysts reiterate positive outlook on the market given the emerging improvements in the macroeconomic fundamentals, accommodative monetary policy stance, and the ongoing results season with solid earnings expectations for cyclical stocks.

“However, concerns related to inflation due to expected hike in [the] petroleum prices and continued surge in [the] virus cases may hurt [the] market sentiments in the near-term. Hence, any short-term corrections may be taken as an opportunity to accumulate stocks,” an analyst at BMA Capital said.

The market rebounded this week mainly on the back of earnings season speculation, positive news flow on the economic front, and disapproval of the federal government to enforce a complete lockdown in the country.

The Pakistan Stock Exchange KSE-100 shares index gained 0.92 per cent, or 434.66 points, to close at 47,489.95 points. The KSE-30 shares index gained 0.68 per cent, or 128.30 points, to close at 18,965.35 points.

With the end of the rollover week, the KSE-100 index opened on a strong note, as the investors disregarded the pandemic fears and drew comfort from the federal government’s disapproval to impose a complete lockdown in the country and strong corporate profitability expectations.

Additionally, the news of a tamer inflation reading and 16 per cent decline in the trade deficit for July 2021, and expectations of a surge in the forex reserves lifted the market sentiments.

However, the index continued to show resistance near the 48,000 level and eventually succumbed to profit-taking at the end of the week.

During the week, export-oriented textile and technology scrips witnessed strong trading activity, mainly on account of rising rupee/dollar parity. The energy sector remained under pressure due to uncertainty around the potential release of a $400 million World Bank loan for the power sector reforms and the recent slump in the global oil prices.

Foreign buying worth $3.1 million was witnessed this week against the net selling of $5.4 million last week. Buying was witnessed in technology ($1.8 million), cement ($1.3 million) and the oil marketing companies ($0.2 million).

On the domestic front, the major selling was reported by funds ($10.6 million) and insurance ($6.1 million).

Average volumes surged 12 per cent to clock-in at 455 million shares/day, while the average value of traded securities settled at $85 million, down 5 per cent.

Among other major news; Pakistan saved Rs2.1 billion on Qatar Petroleum LNG offer, K-Electric revised investment plan with Nepra, and Finance Minister Shaukat Tarin directed the ministry to import 2 million tonnes of wheat.

Analysts expect the market to continue trading in the green. “The low interest rate regime and pro-growth stance of the SBP [State Bank of Pakistan] should keep the equities attractive. Moreover, as mentioned earlier, the results season should keep the cyclical in the limelight, while reduced provisioning, and healthy fee income/capital gains should help fuel banking earnings. That said, the Covid’s fourth wave is a concern, which may keep the sentiment jittery,” an analyst at Arif Habib Limited said.

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