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December 8, 2019

Market likely to maintain positive momentum


December 8, 2019

The capital market closed positive for the 6th consecutive week up 3.7 percent as Moody’s not only upgraded the country’s outlook, but also showed confidence in the banking sector regime, dealers said.

The benchmark KSE-100 shares index gained 3.7 percent or 1,445 points to close at 40,732.25 points during the outgoing week ended December 6, 2019.

Upward momentum continued from the preceding week, which strengthened further when Moody's Investors Services upgraded Pakistan's outlook from negative to stable along with improving rating of five key banks. On the other hand, headline inflation was noted at 12.67 percent, above market consensus, owing to supply shock led price hike in perishable food items. However, weekly inflation depicted a decline that eased off concerns on continuity of the same trend. Resultantly, market participation increased. Foreign investors were net buyers during the outgoing week, accumulating positions worth $1.4 million. Most of this was concentrated in fertilisers ($6.9 million) and oil marketing companies ($2.2 million).

Amongst domestic investors, individuals with $18.5 million, and mutual funds at $2.6 million, remained the most active buyers on net basis, whereas banks took benefit of reviving sentiments and sold equities worth $19.4 million. Based on NCCPL data, foreigners bought $1.06 million. On the local side, banks were sellers of $22.3 million, while individuals bought $20.1 million. One remarkable feature of the outgoing week was that on Thursday the KSE-100 index witnessed year’s highest value traded during 2019, clocking in at Rs20.1 billion or $129.6 million. Previous high was witnessed on November 26, 2019 when value traded settled at Rs18.4 billion or $118.5 million. Volume traded settled at 507 million.

The traded value was also a 370 day/251 session high, as the last high was seen on November 30, 2018 at Rs24 billion or $172 million.

Amreen Soorani, research analyst at JS Group said the continuation of positive news flows kept the rally going at the KSE100, which closed positive note on account of Pakistan's contracting trade deficit for November 2019, continued double-digit growth in tax collection and upgrade in outlook by Moody's.

Encouraging news flows in the energy sector also supported the ongoing rally, as the government and IPPs reached an agreement, and energy minister gave a statement that circular debt accumulation went down to Rs11 billion/month from Rs40 billion/month.

Ana analyst from BMA Capital Management said, “As macro indicators churn up favourable outlook, we expect the euphoria to continue with increasing focus towards value picks.”

Further, absence of noise on the political front and muted developments on the international front were expected to keep investor’s interest alive.

An analyst from Arif Habib said the market should continue its positive momentum next week on the back of continuous improvement in the macroeconomic situation of the country. Furthermore, foreign interest in the equity as well as debt markets posts healthy signs for overall investment climate going forward.

Sector-wise positive contributions came from commercial banks (645 points), oil and gas marketing (131 points), power generation and distribution (97 points), e&p (84 points), and insurance (79 points).

Scrip-wise positive contributions were led by HBL (155 points), MCB (144 points), UBL (87 points), BAFL (78 points), and Hubco (75 points).

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