Stocks to take cue from govt’s infrastructure makeover drive

Stocks had a spectacular ran as tons of liquidity left the fixed income and landed in the equities last week, and moving forward the government’s infrastructure and rehabilitation drive is likely to spur trading activities further, dealers said.

Pakistan Stock Exchange's (PSX) KSE-100 shares Index surged 2.34 percent or 966.78 points to close at 42,023 points week-on-week (WoW).

Muhammad Saeed Khalid, head of research at Shajar Capital said, “We expect the automobile industry stocks to remain under the spotlight as better than expected sales volume of the industry may keep investors’ interest in the sector in higher gear”. "We also believe that the announcement of cement numbers in the week ahead will be a vital factor to boost sentiments, further, especially in the Maple Leaf and Pioneer Cement,” Khalid added.

Average volumes settled at 745 million shares (up 70 percent WoW), the highest weekly average volume since March 7, 2005, while average traded value clocked in at $139 million (up 37 percent WoW).

During the week, traded volumes touched a decade high of over 1 billion shares with average volumes for the week hitting a multi-year high of 683.4 million shares, up 56 percent compared with the preceding week.

Similarly, traded value in dollar terms also averaged at a record high level of $132.3 million, up 31 percent. Brokerage BMA Capital Management in a note, said, “The fresh liquidity injections from local and foreign investors amidst soft monetary policy outlook in the near to medium term is expected to instill further optimism in equities”.

“We reckon the latest run-up of the benchmark index along with the stable rupee will generate foreign investors’ interest in blue chip stocks,” the brokerage house added.

Earlier, reports that PM Imran Khan was slated to announce a number of infrastructure development and construction projects in the metropolis triggered a tremendous activity in the cements and engineering sectors that marked WoW return of 5.54 percent and 7.30 percent respectively.

Foreign investors sold equities worth $10 million in the week, compared to a $0.8 million last week. Selling was mostly witnessed in commercial banks ($5.2 million) and cement ($2.6 million).

On the domestic front, major buyers were individuals ($15.4 million) and mutual funds ($8.6 million).

Capital market sustained upward momentum during the outgoing week, which was mainly due to continued reduction in active COVID-19 cases, improvement in economic activity, encouraging external account and foreign exchange reserves, and liquidity shift from fixed income to equities because of low interest rate.

Key highlights for the next week is treasury bills auction in which the government plans to raise around Rs350 billion as against the maturity of Rs494 billion.

The auction result or cut-off yields for the shorter tenor bonds could potentially set the tone for the rest of the month.

Sector-wise positive contributions came from cements (194 points), oil & gas marketing companies (114 points), fertiliser (103 points), chemicals (83 points), and textile composite (82 points).

On the other hand, negative contributions came from automobile assembler (23 points), and power generation & distribution (13 points).

Scrip-wise positive contributions were led by SYS (65 points), HASCOL (65 points), COLG (55 points), MLCF (53 points) and MARI (53 points).