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December 15, 2019

Investors expect bulls gearing up for another rally


December 15, 2019

The capital market closed positive for the seventh consecutive week and though the gains were less compared with the preceding weeks, sentiments remained strong amid belief that after adjustments the index will gain further in coming sessions, dealers said.

After amassing a run up of 10 percent in the past one month, the benchmark KSE-100 sahres index traded around the psychological level of 41,000 points, but failed to post a close above the level to settle at 40,917 points.

The KSE-100 index gained 0.5 percent or 184 points to close at 40,916.59 points during the outgoing week ended December 13, 2019.

According to an analyst from Arif Habib, on Friday the index increased by 402 points (0.98 percent) and 184 points (0.45 percent) for the week. It has increased by 7,259 points (21.6 percent) during past seven weeks. This 21.6 percent increase for seven weeks is the highest since September 2009.

Major developments for the week were inflow of $1.3 billion from Asian Development Bank (ADB) for budgetary support and power sector reforms, increase of $1.8 billion in remittances during November, forex reserves reaching $16 billion, and cut of 11 percent in 10-year PIB rate that was last seen in October 2018.

Activity, on the other hand, stayed decent with the main board and the broader market gathering average total volumes of 183.01 million and 275.49 million shares respectively.

Foreign investors were net sellers of shares amounting to $5.80 million. Among local investors, companies and brokers moved in the same direction as foreign investors’ portfolio cumulatively net sold $10.20 million.

This was, however, offset by individuals, mutual funds and insurance companies, who cumulatively net bought $15.41 million.

Coupled with international oil prices gathering steam, interest peaked in the industry after the government indicated that they were in the process of selling a portion of their shares in Pakistan Petroleum Limited (PPL) and Oil and Gas Development Company (OGDC) to Russian oil companies. The government further announced that it will sell a portion of its shares in Pakistan Refinery Limited as well.

PPL and OGDC closed the week 4.55 percent and 3.46 percent higher, while the E&P sector climbed 4.20 percent week on week.

An analyst from Habib Metro-Financial said while the market did lose its momentum during the week, the improving macroeconomic indicators coupled with higher central bank reserves could keep market participants interested.

An analyst from Arif Habib said, “We believe the index will continue its upward journey as the economy depicts signs of resurrection.”

Furthermore, improvement on the external front together with stability in the rupee was expected to reassure foreign investors. Meanwhile, inflationary readings were set to touch peak in January 2020, and with an imminent interest rate cut to follow, domestic investors remain jubilant as well, he added.

Sector-wise positive contributions came from oil and gas exploration (273 points) as Pakistan invited Russia to acquire government shares in OGDC and PPL, chemical (54 points), food and personal care (47 points), fertiliser (42 points), and tobacco (38 points).

Scrip-wise positive contributions were led by OGDC (101 points), PPL (84 points), Mari Petroleum (52 points), Nestle (43 points), and Pakistan Oil Limited (36 points).