Market likely to gain on Saudi interest in CPEC

The market is likely to score fresh gains on Saudi interest to invest in Pakistan, however, concerns about unaddressed economic challenges may push foreign investors to the sidelines, analysts said.

Salman Ahmed, head of equity sales at Aba Ali Habib Securities, said the developments on the weekend that Saudi Arabia would be the third partner in China-Pakistan Economic Corridor (CPEC) were a positive signal for the market, however some concerns still present in the minds about the economic challenges.

“Market men need some tangible results on the economic front and (materialisation of) promises made by the brotherly country, as well as the news that the US might release an amount against the Coalition Support Fund,” Salman added.

According to an analyst from BMA Capital Management, macro stability would likely remain a major focus area for the market. Further, post recent decision by the Islamabad High Court on Avenfield case, the political landscape might not see encouraging developments, which would also occupy the investors’ attention.

The analyst said BMA Capital Management expected a 50bps hike in policy rate to eight percent. “Trading activity may also be marred by monthly rollover of future contracts next week,” he added.

Pakistan Equities turned green during the week with the index gaining 400 points or 0.98 percent to close at 41,320 points.

An analyst from Topline Securities said much of the gain came after the announcement of mini budget by the new government, when the index gained 718 points during Wednesday’s trading session. To note, the week ended early ahead of two days holiday on account of Ashura.

The optimism was also clearly reflected in investors’ overall participation, where average daily turnover improved by 13 percent to 157 million shares, while average daily volume was simultaneously up by seven percent to 51 million shares.

Foreign investors sold 12.6 million dollar worth of equities during the week, which coincided with FTSE Asia Pacific index rebalancing. Much of the index gains were due to the automobile assemblers and automobile parts and accessories sector, which added 148 points to the index. Select stocks Honda and Pak Suzuki gained five percent owing to removal of ban on non-tax filers from buying motor vehicles.

To note, auto stocks have taken a heavy beating during the year as concerns on economy and the said ban took its toll on the sector outlook. Further, pharmaceutical sector helped the index rise by 83 points to remain in green due to relief provided by the mini budget announced by the finance minister on the import of medical equipment, analysts believed.

The news flow this week remained strong both on economic and political front despite a shortened trading week. In a major development, Economic Coordination Committee (ECC) finally approved hike in gas tariff for various consumer slabs.

The development was followed by unveiling of a mini-budget for FY19 and prime minister’s ongoing visit to Kingdom of Saudi Arabia. Mini budget proposal plus ECC meeting involved crucial decisions for fine tuning the macro policy with an objective to address key economic challenges.