Earnings, economic indicators lift stocks; central bank decision awaited

KARACHI: Pakistan stocks rose 2.5 percent this week, boosted by strong corporate earnings and upbeat economic indicators, and is likely to extend gains next week ahead of the central bank's policy meeting, analysts said.

The market closed at 47,077 points at the benchmark index, soaring by 1,156 points (up by 2.5 percent) WoW. Average volumes arrived at 376 million shares (up by 5 percent WoW) while the average value traded settled at $44 million (up by 37 percent WoW).

“The stock market is anticipated to maintain its positive momentum next week, driven by the announcement of financial results. However, the market will closely monitor the SBP’s upcoming monetary policy decision on July 31, 2023,” said brokerage Arif Habib Ltd.

The market showed a noticeable upward trend throughout the previous week, helped by the results season and a few encouraging economic developments.

A key driver behind the market rally was China's decision to extend a $2.4 billion loan repayment period without raising its markup, reflecting a positive gesture of support from a major economic partner.

The announcement of a partnership by five Pakistani state-owned companies and Saudi Arabia to carry out a significant $10 billion refinery project inside Pakistan also helped to boost the market mood and hinted at possible economic growth for the nation. These positive improvements allowed the stock market to break the 47,000 barrier, which was a huge achievement since November 2021.

Meanwhile, PKR appreciated during the week against USD, closing at PKR 286.45, gaining PKR 0.36| 0.13 percent WoW.

Foreigner buying continued during the week, clocking in at $2.8 million compared to a net buy of $5.4 million last week. Major buying was witnessed in E&P ($1.3 million) and banks ($1.1 million). On the local front, selling was reported by mutual funds ($6.0 million) followed by insurance companies ($1.8 million).

Sector-wise positive contributions came from banks (602 points), E&Ps (175 points), power (137 points), and OMCs (113 points). Scrip-wise positive contributors were HBL (211 points), HUBC (115 points), OGDC (108 points), UBL (101 points), and MEBL (93 points).

The sectors which contributed negatively were fertilizer (44 points), automobile parts (7 points), and tobacco (6 points). Meanwhile, scrip-wise negative contributions came from i) DAWH (39 points), ii) ENGRO (25 points), SYS (9 points), THALL (7 points), and PAKT (6 points).

Ali Najib at Topline Securities said PSX managed to close the week above 47k after the gap of 19 months. The results season kicked off with a positive surprise where UBL announced Rs11 dividend.

Yield on 3 and 12 months bond were up by 18 and 1bps, respectively, while 6 months bond was down by 4bps. Chinese Safe Deposits of $1 billion got rolled over and the State Bank of Pakistan permitted exchange companies to export foreign currencies other than USD via cargo/security companies and repatriate equivalent USD within 5 days in their Pakistan bank accounts.

KASB Pakistan Research said Pakistan’s equity market’s performance was driven by robust financial results and strong payouts by the banking industry.

Investor participation significantly increased by 30 percent WoW as market sentiment improved with volumes averaging at 198.5 million. Notably, the last trading session

of the week saw a volume of 254 million shares, which is an 11-month high.

Muhammad Waqas Ghani, an analyst at JS Research, said following last week's momentum, investor optimism remained strong throughout this week.

On the economic news front, the government's plan to establish a Rs2.3 trillion Sovereign Wealth Fund has emerged, with the identification of seven state assets to be transferred to the fund. The fund's operations will be overseen by a Supervisory Council led by Prime Minister.