Stocks seal a strong week ahead of earnings season

Stocks sealed a strong week, ending January 19, 2018, reclaiming 2.9 percent, largely led by staggering foreign inflows ahead of corporate earnings season and amid loud bets of significant growth together with lucrative payouts, dealers said.

“This year has turned out surprisingly well with investors tossing the KSE-100 index higher to achieve 11 positive sessions out of the 15 trading days in January 2018, which cumulatively added 9.2 percent to the index,” an analyst at Arif Habib Limited said in a report.

“In particular, foreigners played a key role in driving the market uphill as buying spree remained a remarkable $82.48 million in 15 days.”

The analyst added that the index remained choppy during the week as investors were panicky on account of the protest planned by the joint opposition parties to pressurise the ruling government [into meeting their demands]. “But a rather underwhelming show could not dampen investor sentiments which resulted in strong rally this week,” the analyst said.

The KSE-100 shares index gained 2.9 percent or 1,245.11 points to close the week at 44,178.83 points, whereas KSE-30 shares index gained 3.3 percent or 721.35 points to end at 22,392.36 points. Foreigners turned out to be the net buyers as they mopped up shares wortj $33.1 million in the week. On the other hand, domestic investors continued to sell into the rally as individuals and mutual funds offloaded shares worth $10.1 million and $12.8 million respectively.

Faizan Ahmed at JS Global Capital said bullish sentiments prevailed during the week at the local bourse. “Political news remained at the forefront, however protest rally held during the week failed to create any major impact, which calmed investors' nerves, resulting in positive sentiments at the bourse in subsequent sessions,” Ahmed said. In the outgoing week, banks, cements, fertilisers, and autos got the index going. Banks returned 2.6 percent led by expectations of higher inflation fueled by rupee depreciation and resultant increase in interest rates. However, the real thrust came from foreign buying which was largely concentrated in banking shares, followed by cement stocks. Cement shares consolidated 6.4 percent drawing strength from Supreme Court of Pakistan’s allowing construction of high-rise buildings (up to six storeys) in Karachi and continued regulatory delays on cement expansions in Punjab.

Auto stocks revved up by 5.7 percent fueled by regulatory controls on automobile imports under gifts scheme, which can significantly add to demand for locally assembled players. Other key highlights of the week included Prime Minister Shahid Khaqan Abbasi’s hinting at a potential amnesty scheme on foreign assets, hefty participation of Rs1.0 trillion in T-Bills auction with no bids for 6-month and 12-months papers, foreign direct investment declining 2.8 percent to $1.38 billion and cotton production increasing by 7.6 percent. “With regards to the sectors, we expect banks and cements to remain in limelight owing to inflationary pressures, resultant higher interest rates and regulatory developments with regards to expansions, respectively. From next week; however, investors’ focus will start to shift to the result season”.