The market remained positive for the second week, as benchmark KSE-100 index scored more than 4.5 percent on the back of several positive economic developments, including interest of foreign institutions in the debt market and a green chit from the International Monetary Fund on Q1 performance.
Waning concerns on the economic front supported the slight growth in foreign exchange reserves of the central bank, and consequentially kept the exchange rate parity stable. This was also the reason for foreign investment in government backed treasury bills at almost 800 million dollars since the beginning of fiscal year 2019/20. The Pakistan Stock Exchange (PSX) KSE-100 index was up 4.5 percent or 1,606 points to close at 37,584 points this week. The market gain in the week was largely helped by overseas Pakistanis, whose net buying of 3.28 million dollars allowed net Foreign Investors Portfolio Investments (FIPI) to close as net buy of 4.32 million dollars.
Among local investors, mutual funds and individuals cumulatively bought 21.30 million dollars while banks/DFIs and insurance companies sold 25.05 million dollars.
With the market viewing stocks to be trading at attractive levels, the bulk of interest was in cyclical sectors which saw a further upwards push. Engineering, automobile assemblers and cements went up 21.48 percent, 11.35 percent, and 6.37 percent respectively.
An important development during the outgoing week keenly followed by the investors was DG Khan Cement aiming to become the country’s largest cement maker by expanding its capacity by 12,000 tons/day.
Also, Service Industries notified the exchange regarding its greenfield project for undertaking the manufacturing and sale of truck and bus radial category of tyres in Pakistan.
While improving macroeconomic indicators and investor sentiments could help the bourse’s upward momentum to continue in the near term, profit takers could take hold of the market as they look to cash in the high gains from the last two weeks, said an analyst from Habib Metro-Financial Services. “We recommend investors to find exposure in blue-chip names at attractive levels and maintain our liking for E&Ps, large cap banks and fertilisers,” he said.
An analyst from Arif Habib said the market might witness a temporary spell of consolidation, “we expect the index to continue its upsurge going forward led by improvement in the macroeconomic landscape”.
Moreover, augmented participation by foreign and local investors (courtesy improved volumes) in the debt and equity space has also kept the sentiment upbeat.
“We advise market participants to cherry pick blue chip scrips and keep their view long,” he added.
A BMA Capital Management analyst said that most investors would keep an eye on the upcoming Monetary Policy Statement (MPS) as Pakistan’s economy was presently in a position to afford a cut in interest rates. “We believe our view of a 50bps reduction in MPS, in-line with the government’s stance of promoting growth in Pakistan’s economy. Moreover, the drowning of the political noise will further keep investors’ interest upbeat.” Sector-wise positive contributions came from commercial banks (430 points), power generation and distribution (203 points), cement (133 points), E&P (127 points), and OMCs (101 points). Negative contributions were led by tobacco with 33 points.