Stocks set to extend gains on gas price expectations, earnings season

The market concluded the week on a high note, and traders anticipate the positive momentum to continue in the upcoming week, citing expected gas price adjustments and the ongoing earnings season as catalysts for optimism.

"We anticipate the market to continue to ride the wave of positive momentum in the upcoming week, amid expectations of gas price adjustments to address the circular debt issues," brokerage Arif Habib Ltd said in a market note. "Along with this, the results of certain scrips are expected to fuel the positive sentiment of the market further."

During the past week, the market surged past 49,000 points, a level last witnessed in June 2017. A bullish trend has been sustained due to robust financial results that surpassed market participants' expectations. Furthermore, Pakistan was granted a Generalized System of Preferences Plus (GSP+) extension for four years.

Moreover, remittances for September 2023 increased by 5 percent month-on-month, reaching $2.21 billion. The State Bank of Pakistan's foreign exchange reserves also showed strength, rising by $31 million to reach $7.6 billion as of October 6, 2023.

The market concluded at 49,493 points, marking a gain of 2,000 points or 4.2 percent week-on-week.

Trading volumes saw an average of 376 million shares (up 29 percent week-on-week), while the average traded value settled at $36 million (an increase of 38 percent week-on-week).

Foreign investors were buyers this week, with net buying amounting to $1.41 million compared to net selling of $12.05 million in the previous week. The technology and communication sector received the most substantial foreign investment ($1.0 million), followed by exploration and production ($0.87 million). On the local front, insurance reported selling worth $2.1 million, followed by individual investors ($2.0 million).

Sector-wise, positive contributions were seen from commercial banks (498 points), fertilizer (447 points), exploration and production (283 points), power (250 points), and cement (127 points). On the contrary, negative contributions were observed in individual scrips like TRG (123 points), COLG (14 points), LOTCHEM (8 points), GHGL (5 points), and FCEPL (3 points).

Sectors that contributed negatively included technology (79 points) and chemicals (21 points).

Among the scrip-wise positive contributors were HUBC (182 points), FFC (178 points), PPL (151 points), UBL (123 points), and ENGRO (118 points).

Nabeel Haroon at Topline Securities credited the market gain to the continuous appreciation of the rupee against the dollar, the anticipated gas price hike decision, and the commencement of the results season.

During the week, EFERT announced its results, recording the highest-ever consolidated quarterly profit of Rs9.6 billion (EPS: Rs7.17), marking a 129 percent year-on-year increase. EFERT also declared an interim dividend per share of Rs6.

Other significant developments during the week included car sales in Pakistan reached 8,312 in September 2023 (a 10 percent month-on-month increase while down 26 percent year-on-year). Additionally, PSMC announced its board meeting scheduled for October 19, 2023, to consider the purchase of all its outstanding shares and delisting from the exchange.

Muhammad Waqas Ghani, an analyst at JS Research, said recovery in key macroeconomic indicators was the primary reason for renewed investor interest.

"The rupee continued its persistent upward trend, concluding the trading week at Rs278 in the open market, compared to Rs300/dollar just a month ago.

This positive performance is attributed to efforts by the State Bank of Pakistan, which implemented measures to oversee the forex market and enforce regulations against unauthorized currency operators," Ghani said.

According to State Bank of Pakistan data, an increase in remittances was witnessed in September 2023. Workers' remittances amounted to US$2.21 billion in September 2023, depicting a month-on-month increase of 5.3 percent.