Stocks seen extending stellar run into next week

Stocks had a stellar week, ended January 3, 2020, as unprecedented but positive political developments sent investors, especially local financial institutions, on a whopping buying splurge, and the market is likely to see more of it next week, dealer said.

Pakistan Stock Exchange’s KSE-100 share index ended the week with an impressive growth of 3.61 percent or 1,475 points to close at 42,323 points.

An analyst from Topline Securities said fresh allocations beefed up the market, where general aura of positivity prevailed, and a solid foundation for 2020 was laid.

Average traded weekly value improved 29 percent to Rs10.7 billion, while average volume 23 percent to 281 million shares, compared to previous week.

Based on National Clearing Company of Pakistan Ltd (NCCPL) data, foreigners sold $7.3 million worth of equities during the week, while on the local side, mutual funds and banks net-bought shares valuing $8.6 million and $4.2 million respectively.

Cement sales statistics, released during the week, showed a 6.5 percent increase in the first half of this fiscal year, wherein exports grew by a notable 22 percent.

The increased dispatches came as a breather for the sector with a gain of 5 percent but generally sales are expected to remain subdued until infrastructure and real estate development gathers pace.

An analyst from Spectrum Securities said the index was up mainly because banking sector injected excess liquidity into the stock market, whereas the blue chips were the major drivers.

“The initiation of CPEC’s (China-Pakistan Economic Corridor) second phase and improving situation on external account will further support the positive sentiments.”

However, the shortage of gas supply to industries and higher energy prices mounted some pressure on index, he added. “This indicates the impact of higher energy prices will be visible in inflation shortly,” the Spectrum analyst said.

A leading trader was of the view that political noise remained relatively low on the domestic front; however, reports of a US airstrike in Baghdad that killed a key Iranian military commander had substantially increased the risk of a big flare-up in geo-political tensions.

An analyst from Habib Metro Financial Services said, “We foresee the market to stay in consolidation in the near-term, whereas improving macros have led us to give an overall bullish stance in the long run”.

“The benchmark index is likely to gradually move towards north in line with future positive economic developments,” the analyst added.

A BMA Capital Management analyst said there were expectations of considerable influx of liquidity, which would keep the index buoyant.

“[On the other hand], the potential fallout from the US airstrike is likely to compel investors to remain cautious, while building fresh positions,” the analyst said.

Arif Habib Limited in a note said, “We expect the market to remain in the green zone next week”. “Oil scrips may manage to attract the limelight following renewed tension in the Middle East, which is likely to fuel international oil prices.”

Additionally, fresh portfolio allocations and inflow of funds with the advent of the New Year should support the momentum, the brokerage said.

Sector-wise positive contributions came from commercial Banks (261 points), fertilisers (218 points), oil & gas exploration companies (208 points), power generation (184 points), and cement (171 points).

Scrip-wise positive contributions were led by Hub Power Company (138 points), Lucky Cement (124 points), Engro (102 points), Oil and Gas Development Company (85 points), and Pakistan State Oil (79 points).