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January 12, 2020

Stocks likely to sustain upward momentum


January 12, 2020

Stocks closed positive during the week, scaling above 43,000 points despite geopolitical tensions on the back of US-Iran conflict, dealers said, expecting the market to sustain its recent upward momentum.

A lot of drama was witnessed in the global markets too, as oil surged and people rushed to havens such as gold. The conflict for now seems to have been short-lived, dealers said.

Equity market showed resilience to the conflict, which suggests investors have become familiar with how messy situations could unlock other avenues of opportunity.

Pakistan Stock Exchange (PSX) benchmark KSE100-shares index ended the week on gains of around 2.1 percent or 885 points to close at 43,207.05. Average Volumes settled at 303 million shares, up 8 percent on weekly basis, while average value traded clocked-in at 78 million dollars, up 13 percent on weekly basis.

Foreign buying clocked-in at 7.0 million dollars, compared to a

net sell of 7.3 million dollars last week. Buying was witnessed in fertiliser 5.9 million dollars and exploration and production 1.8 million dollars.

On the domestic front, major selling was reported by mutual funds at 5.9 million dollars, and individuals at 4 million dollars.

Amreen Soorani from JS Capital said, “The assassination of Iranian General Qasem Soleimani by US was followed by a sharp rise in global commodity prices and decline in global equity markets.”

However, President Donald Trump's speech midweek that addressed the current stance of US eased the tensions between the two countries. This boosted investor confidence, supporting a bounce back in the equity markets, and correction in commodity prices.

An analyst from Arif Habib said, “As the market broke through its key resistance levels this week, we believe the upwards trajectory may continue next week.

Fundamentals appear intact with stable rupee, compressing current account deficit, and inflows in T-bills, PIBs and the local bourse, which bode well for the index.

“With macro-economic indicators improving and political volatility low, we expect the market to sustain its recent upwards momentum,” an analyst from Habib Metro-Financial Services said.

“We recommend investors to find exposure in fundamentally sound scrips trading at attractive levels.”

BMA Capital Management said the US-Iran tension has been largely resolved, reflection of which has also been witnessed in the markets across the globe.

Furthermore, ample domestic and fresh foreign liquidity would likely set the pace of KSE-100 towards the year-end target of 55,000 points.

In upcoming weeks, earnings season is expected to guide the market sentiments. In terms of financial results, banking sector would likely outshine other sectors, with financial performance of cyclicals expected to remain disappointing.

Sector-wise positive contributions came from commercial banks (403 points), oil and gas exploration companies (178 points), fertiliser (111 points), power generation (86 points), and cement (77 points). Negative contributions were from automobile assemblers (44 points).

Scrip-wise positive contributions were led by Hubco (105 points), HBL (95 points), PPL (88 points), Lucky Cement (87 points), and UBL (73 points).