Feel good factor returns as Pakistan bourse remains in green zone

The feel good factor has returned, as the stocks closed the outgoing week ended October 15, 2021 in the green zone, dealers said.

With the onset of the results season, the market performance will be dictated by the corporate profitability. “We expect the earnings to grow 8 per cent to 10 per cent for the first quarter of the current fiscal year,” an analyst at AKD Securities said.

“Further, the formal announcement of the new ISI head will also help settle jitters on the bourse.”

The government is also under negotiations with the International Monetary Fund (IMF) to revive its plan where any developments on the hike in the energy tariffs and withdrawal of tax exemptions will also be closely tracked.

The Pakistan Stock Exchange KSE-100 shares index gained 0.77 per cent, or 344.29 points, to close at 44,821.53 points. The KSE-30 shares index shed 3.33 per cent, or 0.001 points, to close at 17,521.47 points.

An analyst at Arif Habib Limited said the benchmark equity index closed in the green after four weeks of bleeding.” During the early part of the week, the investors resorted to panic selling, amid the lack of clarity on the continuation of the IMF package, as well as delay in the process to appoint a new ISI director general.”

“Albeit, with [the] finance minister assuring that the government would soon address concerns of the global lender and resume the IMF’s facility, as well as [the] PM’s statement allaying any rumours of a military-political divide, the KSE-100 index posted two swift back-to-back bull runs.”

Foreign selling continued this week, clocking-in at $13.3 million, compared with a net selling of $3.7 million last week. Major selling was witnessed in the fertiliser sector ($12.1 million), commercial banks ($7.8 million) and cement ($3.11 million).

On the local front, buying was reported by insurance companies ($12.2 million); followed by mutual funds ($3.4 million).

Average daily volumes surged 29 per cent to 342 million shares/day, while the average value of traded shares settled at $71 million, up 20 per cent.

This week, commercial banks held the title of the best performing sector with a gain of 3.6 per cent over the last Friday, which reflects a shift in investors’ preferences towards defensive stocks in a rising interest rate environment.

The news reports during the week bore both good and bad news. On the plus side, after conclusion of the technical level talks with the IMF, the government is hopeful of a positive response. Moreover, auto sales jumped 84 per cent during the outgoing quarter. It has been reported that the withdrawal of sales tax relaxations and zero-rating is on the cards through a Presidential Ordinance in the coming days.

The government has also reportedly agreed to pass on the withheld power tariff increase to consumers in a phased manner. Moreover, probes against those named in Pandora Papers have also started this week.

As we get closer to resuming the IMF programme and receiving a $1 billion tranche, analysts expect the market to perform well in-tandem, whereas recent bouts of selling at the index has once again opened up valuations.