Virus curve, cement, earnings to call market tune

Institutional inflows and construction-powered cement and steel sectors helped stocks rally for the fourth consecutive week, while optimism arising from a flattening COVID-19 curve could prove infectious in the coming days, dealers said.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 shares index surged 3.15 percent or 1,140 points to close at 37,331 points week-on-week.

Brokerage Habib Metro-Financial in a report said, “For the near term it seems the market may continue its bullish trend due to the improving situation on the COVID-19 front both domestically and internationally”.

“We recommend investors to remain cautious and focus their efforts on hunting value in blue chip stocks on dips,” the brokerage said.

Average daily volumes and traded value for the outgoing week increased 22 percent and 34 percent to 426 million shares and $99.3 million, respectively.

Brokerage Arif Habib Limited in a note said, “We expect the market to remain green especially cyclical sectors to remain in the limelight including cements and steel due to government’s focusing on reviving economic activity through housing and construction sector”.

Furthermore, continuous slowdown in COVID-19 cases on daily basis is further improving investors’ confidence, the report said.

A leading analyst said, “The massive reduction in benchmark interest rate limited the investment avenues in the fixed income instruments and fear of tied-up liquidity due to low activity in real estate sector, encouraging investors towards equities helped increase the volumes and overall interest in choice and blue chips”.

The market kicked off on a positive note, continuing the rally, however, during the mid-week, 13-day winning streak came to an end as the index slipped 66 points on account of profit-taking, the analyst added.

Foreigners offloaded stocks worth $27.37 million compared to a net selling of $9.46 million last week.

Major selling was witnessed in oil exploration and production (E&P) ($20.40 million) and fertilisers ($2.61 million).

On the local front, buying was reported by individuals ($15.93 million) followed by insurance companies ($14.29 million).

Optimism came from capital injection from local investors as equities are being viewed as the preferred asset class. The government plans to build low cost subsidized houses which rejuvenated investors’ interest in the cement sector.

Moreover, State Bank of Pakistan has asked all commercial banks to allocate five percent of their portfolio to construction sector, again attracting interest in cements, while Prime Minister has inaugurated construction works at Diamer-Basha Dam that will increase demand for cements and steel.

Likewise, commercial banks performed well due to expectation of improved earnings in the upcoming results.

The E&P sector also stretched its rally drawing support from discovery of new oil and gas deposits at the Mamikhel South-01 in the TAL Block, further excitement was induced by higher international crude stemming from contraction in US oil reserves.

Contribution to the upside was led by cements (213 points), oil and gas exploration companies (196 points), fertiliser (149 points), automobile assembler (91 points), and commercial banks (55 points).

Scrip wise major gainers were LUCK (85 points), POL (78 points), DAWH (77 points), PPL (75 points), and INDU (63 points).

Whereas, the major losing scrips were BAFL (13 points), NBP (9 points) ABOT (8 points), SYS (8 points) and COLG (7 points).