Stocks likely to recover on quaterly earnings season

Stocks went through technical correction while political friction between the MQM and PTI also kept investors on the sidelines, which forced benchmark KSE-100 index to move in a narrow band during the week, dealers said.

An analyst from Arif Habib said, “We expect the market to be positive in the upcoming weeks as sentiments should reflect improvement in foreign exchange reserves of the SBP and stable rupee/USD parity amid inflows in T-bills and narrowing CAD.” Albeit, commencement of the financial result season in the coming week would keep certain scrips under limelight.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares ended the week with a loss of around 0.1 percent or 39 points to close at 43,167.76 points level.

Average Volumes settled at 246 million shares down by 19 percent on week on week basis, while average value traded clocked-in at 49 million dollars down by 38 percent on week on week basis.

An analyst from Spectrum Securities said the market remained in neutral territory as low trading volume was noted during the week.

Astute investors have seen the market as highly overbought and expect that any upcoming correction would open the opportunity for potential investment.

“Bulls are waiting for further positive development in the economy which will attract fresh investments in the stock market. Although, T-bills lured the highest investment record in a single day reflecting foreigner's interest in government securities as high yield making it an attractive investment vehicle,” he said.

Major sector news flow included release of automobile numbers for December 2019 where car sales declined by 43 percent in the first half of the current fiscal year as compared to the same period last year, where the only notable improvement was for Pak Suzuki Motors, which posted an increase of 49 percent sales on month on month basis.

Foreign buying continued this week clocking-in at 2.8 million dollars compared to a net buy of 7 million dollars last week. Buying was witnessed in E&Ps by 1.4 million dollars and fertilisers 1.3 million dollars. On the domestic front, major selling was reported by insurance companies at 2.8 million dollars and individuals 2.2 million dollars.

Based on NCCPL data, foreigners were net buyers of $2.81 million. On the local side, banks were net buyer of $2.3 million, and mutual funds were net sellers of $1.7 million

An analyst from Habib Metro-Financial Services said the result season and upcoming FATF judgment due next month would likely decide the short-term direction of the index. “Meanwhile, we suggest investors to stay cautious and tilt their portfolio towards fundamentally strong stocks,” he said.

Moving forward, the State Bank of Pakistan (SBP) is expected to announce Monetary Policy Statement (MPS) later this month that would likely be a neutral event for the market, an analyst from BMA Capital Managements said.

Sector-wise positive contributions came from commercial banks (109 points), automobile parts and accessories (29 points), automobile assembler (20 points), refinery (20 points), and textile weaving (12 points).

Negative sector-wise contribution came from oil and gas exploration companies (96 points) and power generation and distribution (55 points).

Scrip-wise positive contributions were led by Meezan Bank (31 points), Habib Bank Limited (28 points), Thal Limited (25 points), Byco (21 points), and Habib Metropolitan Bank (18 points).