Analysts expect bulls to rein in on Pakistan stock market

KARACHI: The Pakistan equity market gained 1.68 per cent during the week ended October 22, 2021, while analysts expect the market to remain positive in the upcoming week.

“With [the] IMF [International Monetary Fund] and Pakistan expected to reach [an] agreement soon, the investors’ sentiment is anticipated to remain buoyant. Moreover, with the ongoing results season, certain sectors and shares are expected to stay under [the] limelight,” an analyst at Arif Habib Limited said.

“Keeping in view [the] concerns over inflation and devaluation of [the] rupee against [the] greenback, investors are expected to have a cautious approach.”

The Pakistan Stock Exchange (PSX) KSE-100 shares index gained 1.68 per cent, or 756.83 points, to close at 45,578.36 points. The KSE-30 shares index gained 1.99 per cent, or 350.33 points, to close at 17,871.80 points.

Average volumes declined 13 per cent to clock-in at 299 million shares/day, while average value of traded securities declined 10 per cent, settling at $64 million/day.

Foreign selling continued this week, clocking-in at $7.3 million, compared with a net selling of $13.3 million last week. Major selling was witnessed in fertiliser ($4.5 million) and commercial banks ($3.8 million). On the local front, buying was reported by insurance companies ($4.6 million); followed by other organisations ($2.5 million).

The market commenced on a negative note this week given the uncertainty over the outcome of Pakistan-IMF talks tagged with surge in the petroleum prices, raising concerns over inflation. The market sentiment changed after Adviser to the Prime Minister on Finance Shaukat Tarin informed that the talks with the IMF were moving in the positive direction, with the staff-level agreement expected to be reached soon.

Alongside this, the current account deficit for September 2021 narrowed 24.5 per cent (MoM) to $1.1 billion, fueling the positive momentum. On the flip side, continuous drop in the rupee/dollar parity to Rs174 (an all-time high exchange rate), reduction in the central bank reserves by 8 per cent to $17.5 billion and the Financial Action Task Force (FATF) retaining Pakistan on the grey list in its plenary meeting, kept the index in check.

Amreen Soorani at JS Global Capital said that apart from attractive valuations, the spike in secondary market yields and some retracement in coal prices led to the bullish trend this week. Hence, key performing sectors included banking (up 3 per cent) and cement (up 4 per cent).

The auto sector (down 3 per cent) was the major laggard, as the sector’s margins continue to struggle over rising commodity, freight costs and currency devaluation, making a case for price increase in the near future.

Going forward, analysts expect the market to take direction in line with the IMF decision, and recommend investors to adopt a selling on strength strategy in the upcoming rollover week.