Bailout packages, mini-budget likely to rule market

Stocks increased four percent during the outgoing week on the back of an official announcement that a $3 billion support package had been agreed with the United Arab Emirates, and sharp increase in crude oil prices which triggered rally in local E&Ps accounting for 40 percent gain in the overall index, dealers said.

The benchmark KSE-100 shares index gained 1,502 points or 4.0 percent closing at 39,049 points level during the outgoing week. The improvement was also due to the development that around $3 billion support package was agreed with the United Arab Emirates, as per official announcement, to help the country with its balance of payments crisis.

Furthermore, the Financial Action Task Force (FATF) expressed a degree of satisfaction over Pakistan’s efforts and action plan to combat money laundering and terror financing under international obligations. However, the FATF indicated certain areas to do more before May this year to get out of the grey list, as per Pakistani officials. This news further improved investor sentiments.

With WTI crude oil rising 10 percent in past week, E&Ps were the best performers during the week adding 606 points to the index. They were followed by commercial banks and fertilisers, which added 600 points, cumulatively.

The average daily traded volumes for the week were 140 million shares, up 18 percent on weekly basis and average daily traded value for the week was $46 million, up 12 percent compared with the preceding week.

Foreign investors accumulated stocks worth of $0.6 million in the past week compared to net selling of $0.5 million in the preceding week.

Buying was concentrated in commercial banks, and cements.

On the local front, mutual funds led the bullish sentiments, displaying major buying at the index worth $6.7 million followed by broker proprietary at $6.4 million.

Other factors that impacted the market activity during the week included the 10 percent increase in remittances during the first half of the current fiscal year, though December 2018 remittances declined by two percent YoY, and State Bank of Pakistan’s (SBP) forex reserves which fell to $7.05 billion in the last week.

Meanwhile, the government appointed new managing directors for Sui Northern Gas Pipeline (SNGPL) and Sui Southern Gas Company (SSGC), and the World Bank released a report where it expects Pakistan’s FY19 GDP growth to decline to 3.7 percent.

An analyst from Arif Habib Securities said the market would remain positive given some material positive events were expected to take place, including Saudi energy minister’s arrival in Pakistan and expectation to establish the largest oil refinery in the country.

In addition, fulfilment of commitments made by Prime Minister Imran Khan to the members of stock exchange during his visit regarding abolition of advance tax and allowance of capital losses to be carried forward would also lift investor sentiment.

According to an analyst from BMA Capital Management, the upcoming week was expected to remain focused on the upcoming IMF meeting.

“Investors may also take cues on upcoming policy rate announcement from T bill due on January 16, 2019, which may provide clarity on revision in market expectations,” the analyst said.

Moreover, exuberance from this week could continue well into early next week, provided political sphere remains relatively muted.