Stocks gain 7.65pc in outgoing week on attractive valuations

After a decade, the benchmark KSE-100 shares index recorded the highest weekly gain of 7.65 percent or 2,537 points, mainly owing to clarity on the interest rate, devaluation of rupee and its recovery with the IMF’s commitment to help the country get out of the woods.

The last such gain was made by the index in the first week of April 2009.

During the outgoing week trading commenced on a positive note despite a 150 basis points hike by the State Bank of Pakistan on Monday, which was higher than consensus expectation of 100bps.

An analyst from Arif Habib Limited said, “To note, revival of investors’ confidence came on the back of a meeting between stock brokers and Advisor to PM on Finance Hafeez Sheikh to form a PSX support fund for market stabilisation along with approval of deferred oil payment facility of $3.2 billion with Saudi Arabia, which will ease pressure on balance of payments’ and foreign exchange reserves.”

The market was expecting a fund size of Rs17 billion-Rs20 billion, similar to the one launched in 2009, which might invest in government owned companies in the upcoming weeks.

The index closed at 35,704 points level, after gaining 2,537 points during the outgoing week. All sessions of the week closed on a positive note. Average traded volumes were up by 66 percent to 178 million shares.

An analyst from Topline Securities said fertilisers remained among one of the top contributors to the index with 524 points, with 268 points contributed by Engro and Dawood Hercules cumulatively. Financials added 494 points to the sector gain amid above-expected interest rate hike.

During the first four sessions, foreigners remained net sellers of $3.44 million; however in the last session, settling of rupee encouraged foreign participants where net buying from these institutions amounted to $3.458 million.

Foreign buying continued this week clocking in at $0.02 million compared to net buying of $8.21 million last week. Major buying was witnessed in cement ($2.19 million) and commercial banks ($1.44 million).

On the local front, selling was reported by insurance companies ($6.01 million) followed by mutual funds ($5.64 million). Average daily volumes for the outgoing week were significantly up by 66 percent to 178 million shares. Likewise, value traded increased by 44 percent to $40 million.

An analyst from Arif Habib said the market would remain positive in the upcoming weeks on back of PSX stabilisation fund, along with contraction in the current account deficit by 27 percent in 10 months.

However, economic concerns like weakness of rupee against the greenback and further rate hikes expected with inflation expected to tick higher post adjustment in utility prices (gas and electricity tariff hike) posed risks.

An analyst from BMA Capital Management said in the coming week, market participants were likely to keenly track news flow on the upcoming budget and geopolitical developments in Saudi Arabia and Iran.

Investors would also look forward to the proposed market support fund. However, the analyst cautioned that if the fund did not materialise, it might dampen sentiments in the near-term.

An analyst from Habib Metro-Finance Ltd said market prospects remained positive based on attractive valuations, as most of the negative news has already been built into the stock prices.

“Meanwhile, the current short-term rally is expected to continue, driven by talks of a market stabilisation fund. We would recommend investors to start building positions on a laddered approach with a portfolio tilt towards blue-chips,” he added.