Stocks gain 2.1 percent in week on foreign buying

Economic reform package bolstered investors’ sentiment at the capital market, as the benchmark KSE-100 shares index increased 2.1 percent and went above 41,000 points after almost 50-sessions on foreign buying, analysts said.

The index recorded gains for the fifth consecutive week, as it added 848 points or 2.11 percent, closing at a 50 session high of 41,113 points level. The rally was supported by last week’s Economic Reform Package, the cash deposit from the UAE and Saudi Arabia of $1 billion each, and continued foreign buying for the second consecutive week.

Sector-wise positive contributions came from the commercial banks that added 234 points to the index on the back of the State Bank of Pakistan’s hike in the policy rate. Oil and gas marketing companies added 129 points cumulatively, while automobile assemblers put 83 points, as non-filers have now been allowed to buy vehicles up to 1300cc.

Oil and gas exploration companies (E&P) also generated some spark, as global crude oil prices went up. The E&Ps added 74 points to the benchmark, with cements adding 72 points because of the drop in international coal prices.

After a six percent increase in pharmaceuticals, the sector received unfavourable news during the end of the week, where the Peshawar High Court stayed implementation of 15 percent hike in medicine prices. Moreover, the Power Division allowed raising Rs200 billion in syndicated Islamic Term Finance Facility to deal with circular debt in the ECC meeting held during the week, which would also likely have positive earnings impact on Islamic financial institutes.

Foreigners were net buyers during the week at $12.3 million; however, it was lower compared to the previous week, when foreign investors bought $17 million worth of shares from the capital market.

An analyst from Arif Habib Limited said, “With all eyes set on the Saudi Crown Prince Mohammad Bin Salman visiting Pakistan on February 16, 2019, and reportedly signing trade deals amounting to $18 billion, positive sentiments amongst investors are likely to prevail.”

Foreign inflows were also being anticipated to continue keeping in view the government’s efforts to revive the economy and attract foreign direct investment. “Therefore, we expect the market to remain positive next week,” the analyst added.

BMA Capital Management’s analyst said the upcoming week was expected to remain lacklustre amid absence of triggers and macro data points. “We eye investors to remain largely attuned to any potential development on the IMF programme and the ongoing result season,” he said.

The investors were expected to remain vigilant of the earnings surprises and misses, where better than expected results might trigger rally in select scrips.

Elixir Securities in its note said the index has cumulatively returned 10.9 percent during 2019 till date, backed by strong buying interest mainly from foreigners. With US Fed holding off interest rates and growing doubts of further rate hikes, foreign selling might remain muted, going forward as well.

Nonetheless, concerns continue to persist regarding IMF programme which might not come through soon, owing to immediate funding (availed from UAE and Saudi Arabia) and ongoing deliberations over the future course of policy actions, the note added.