Stocks end strong week on smooth govt transition outlook

Stocks saw another strong week after the much-doubted appointment of caretaker prime minister breathed convincing sentiments into the market, bringing valuation-hungry investors back to the trading floor amid huge foreign selling, dealers said on Saturday.

The benchmark KSE-100 share index extended its gains to close at 42,913 points, strengthening 2 percent or 839 points.

Amreen Soorani, in a weekly roundup report by JS Group, said the sentiments remained positive on a smooth transition from current government to caretaker setup during the week.

Nasir-ul-Mulk, former Chief Justice of Pakistan, took oath as interim prime minister last week, while general election is scheduled for July 25.

During the outgoing week, oil and gas marketing and fertiliser sector rose 2 2.1 percent and 1.5 percent respectively, while banks grew 1.8 percent after State Bank of Pakistan (SBP) increased policy rate by 50bps to 6.50 percent on account of growing external account pressures ahead.

Trading activity also recovered during the week as average traded value jumped 13 percent to $48 million.

Foreign investors sold shares worth $17.5 million during the week, with the bulk of selling concentrated in banking stocks. On the domestic side, insurance companies capitalised on attractive valuations and accumulated shares worth $30.4 million, while mutual funds remained net sellers by offloading shares worth $3.6 million during the week.

Some selected buying was witnessed in the textile companies after the government announced extension of export package for another three years. During the week, the SBP-held foreign exchange reserves, as on May 25, once again posted a decline, reaching $10 billion. However, some foreign support is expected to arrive as World Bank has committed $400 million for green projects in Punjab and China has promised to roll over a $500 million loan that expires in June 2018, which might help boost sentiment of financial institutions and banks.

An analyst from Elixir Securities said that bourse recorded recovery of 2 percent; however, the modest recovery could not salvage the returns for the month of May, which clocked in at a dismal 5.8 percent on persistent foreign selling and concerns on Balance of Payments.

Trading activity remained dull, due to seasonal slowdown in the month of Ramazan.

The BMA Capital said with the interim setup in place, investors’ focus was likely to remain on remedies to handle issues posing risks to macroeconomic stability.

Furthermore, important events like FATF listing decision and OPEC meeting, expected towards end of the month, will be the major discussion amongst the key players of the market.