Stocks reach 9-week high on likely foreign investments

Pakistan’s equity market gained 1,400 points during the preceding week, as investors looked to the prime minister’s visit to China, hoping it would yield similarly positive results as the ones yielded by the trip to Saudi Arabia.

Average volumes hit 64-week high, as the index stayed in green throughout the week.

Topline Securities in its weekly report said the average volume of 322 million shares reached a 64-week high on expected positive results from the PM’s China visit, “hoping it would yield the same results as the Saudi Arabia trip, which helped the index to add 12 percent in eight consecutive sessions”.

Pakistan Stock Exchange benchmark KSE-100 shares index closed the week on a nine-week high at 42,004 points level, while this was also the first time since April 2018 that all five sessions of the week closed on a positive note.

Foreigners were net sellers, offloading positions worth $11.84 million in the first four sessions of the week.

Commercial banks and cement sector drove the market upwards during the week adding 812 points cumulatively, while on the other hand blue-chip exploration and production companies’ shares chipped away 174 points from the index.

Crude prices in the international market continued the downward trajectory on the back of waivers given to several countries on Iran sanctions, refuting supply constraints. This dragged the local E&P stocks under the hammer with Mari Petroleum taking the biggest hit and losing four percent in a single session.

According to an analyst, several blue chips and investment stocks, despite overall gain in the index, were muted because of the poor law and order situation in the country, which did not allow them to gain appreciably.

Amongst textile names, Nishtat Mills showed the most notable uptick in earnings reflecting a turnaround in fortunes for all export-oriented textile players.

Stellar results in textiles were attributed to improved energy availability, weaker rupee giving traction to exports, and better cash flows as funds stuck in refunds and rebates with the government were getting released gradually, said an analyst from Habib Metro-finance Securities.

BMA Capital Management analyst said the investors keenly await details of financial package by China, as September 2018 result season was drawing to a close, and high expectations were pinned on the PM’s visit to China.

The International Monetary Fund (IMF) programme mission is set to visit Pakistan in the coming week to discuss a potential bailout package for the country, which remains a key event for market participants, in our view.

Moreover, above expected inflation print of seven percent in October 2018 reinforces the stance the State Bank of Pakistan (SBP) would raise the interest rate by 100 basis points in its upcoming bi-monthly monetary policy review (due by end of November 2018). That was likely to rejuvenate the interest of investor’s in the banking space.

The SBP profit declined by 26 percent to Rs175.6 billion in fiscal year 2018, compared to last year’s Rs238 billion.