PSX likely to post recovery on attractive valuations

Bulls are expected to return in the market next week for want of attractive valuations, while positive economic indicators are helping recovery in dampened sentiments.

But, lack of any other triggers may keep investors on the sidelines, dealers said.

Brokerage Arif Habib said the market movement would likely to be positive during the coming week.

“With the trade deficit narrowing and foreign reserves stabilising investor sentiment is likely to be positive,” the brokerage said in a report.

“Furthermore, scrip are trading at attractive valuations.”

Habib Metro-Financial Services, however, expects the PSX-100 to underperform with range-bound trading sessions amid lack of triggers.

“Therefore, staying on the sidelines with ample liquidity for value hunting in blue-chip stocks is a wise strategy.”

The capital market during the last week showed sluggish behaviour where buying and selling match gave a little room to the index to score big with cautious approach adopted by the investors waiting for some encouraging development to make fresh deals.

The Pakistan Stock Exchange’s benchmark KSE-100 Index closed at 32,070 points, down 40 points week-on-week.

Average volumes settled at 108 million shares, down 12 percent on weekly basis while average value clocked in at 25 million dollars, down 24 percent.

Foreign selling clocked in at $8.8 million compared to a net buying of $7.8 million last week. Selling was witnessed in cement ($2.4 million) and commercial banks ($2.2 million).

On the local’s side, individuals were net seller of $1.18 million, while banks remained net buyers of $6.66 million.

Sector-wise negative contributions came from commercial banks (122 points), power generation and distribution (24 points), chemical (21 points), pharmaceuticals (14 points), and automobile parts and accessories (13 points).

Scrip-wise negative contributions were led by HBL (67 points), HUBC (56 points), UBL (29 points), SEARL (27 points) and NBP (23 points).

Positive developments were t-bills auction results as per the market expectations, favourable tariff structure by the Securities and Exchange Commission of Pakistan (SECP) to improve market participation, federal government’s plan to launch sukuk in international market, and Sindh government’s decision to put more coal blocks for bidding.

Negative news flow – border tensions with India, International Monetary Fund baring government from extending sovereign guarantees till December review, and dip in the central bank’s reserves took toll on the investors’ sentiments throughout the week.

Oil prices were steady on Thursday, but headed for a weekly loss, weighed down by slowing Chinese economic growth that dampened the demand outlook. Brent fell six cents to $62.68 a barrel, while West Texas Intermediate rose 18 cents to $56.59 a barrel.

However, both were down 2.6 percent on a weekly basis. Market is now eyeing inflation numbers and the central bank’s subsequent move related to interest rate.

Inflation is expected to hover around 11 percent on new base. Lower number may further increase the expectation of interest rate cut, a good sign for liquidity-seeking market.

Upcoming Financial Action Task Force (FATF) review scheduled from 10-14 October might play a vital role in determining the market’s path.