Stocks to look up as economy unlocked

Stocks are in for bigger leaps going forward as the government’s decision to start unlocking the country following a sharp decline in novel coronavirus COVID-19 cases, is going to put economic activities in full swing, dealers said.

Pakistan Stock Exchange's KSE-100 shares Index surged 2 percent or 772 points to close at 40,030 points. The index had last time closed above 40,000 points in March 2020.

In the outgoing week, mostly profit-selling from institutions capped the overall gains in a market that is fundamentally strong to sustain index above 40,000 points level.

Muhammad Saeed Khalid, head of research at Shajar Capital, said, “The week ahead, we expect the volumetric activity to continue in the IT sector mainly on the Intention of Acquisition of World Call and TRG’s subsidiary’s successful inclusion in NASDAQ”.

“We also believe the benchmark index may move above the 41,000 level mainly on the announcement of automobile numbers by the PAMA”.

“We also believe the index will mainly be induced by the updates on the infrastructure and commercial activities in the country, which may likely improve investor sentiments in the cements, steel and electrical goods sectors,” Khalid added.

Brokerage Arif Habib Limited in a note said, "We expect the market to remain positive in the upcoming week”.

“With smart lockdown officially ending on Monday, investor sentiment is set to be positive, although this remains contingent upon containment of COVID-19 cases,” the brokerage added.

Daily Average volume per-session recorded a growth of 64 percent to settle at 638 million shares, while average value traded clocked in at $145 million, registering an increase of 43 percent.

Brokerage BMA Capital Management in its weekly analysis said, “Looking ahead, we opine that consistent declining trend in new COVID-19 cases and death

ratio, stability in local currency and improving profitability outlook of the corporate sector for FY21 will keep the interest alive in the market”.

Furthermore, any dip in the market should be considered as an opportunity to accumulate at these levels, the brokerage added. This week, foreigners bought equities worth $3.7 million compared to a net selling of $9.7 million last week. Buying was witnessed in fertilisers ($2.2 million) and cement ($2 million).

On the domestic front, major selling was reported by insurance companies ($29.4 million and mutual funds ($11.9 million).

Analysts said low interest rate environment coupled with steep “flattening of the curve” proved to be a perfect recipe for the continued optimism in the market.

However, during the week profiting-selling was also witnessed as index surged sharply offering good returns on weekly basis.

An above expectation July inflation number dented the sentiment; however, this was short-lived as the market rebounded on strong cement sales, decline in trade deficit, and surge in central bank’s foreign reserves.

Moreover, approval of key projects (ML-1 Railway upgradation worth Rs11.44 trillion under CPEC by ECNEC along with 4 projects by CDWP worth Rs16.1 billion kept the momentum strong.

Sector-wise positive contributions came from commercial banks (218 points), cement (198 points), insurance (61 points), automobile assembler (59 points), and technology & communication (54 points).

The negative contributions came from oil & gas exploration companies (35 points), and pharmaceuticals (12 points).

Scrip-wise positive contributions were led by HBL (79 points), TRG (65 points), LUCK (60 points), DAWH (45 points), and PIOC (43 points).