Index to stay green on strong corporate profitability

The capital market went over 46,000 points level during the outgoing week on the back of a stable interest rate decision as well as corporate results. The index would likely remain positive in the week ahead as the flurry of results continues.

Pakistan Stock Exchange’s (PSX) KSE-100 shares index resumed its upward trajectory, as it hit a 33-month record high, 1.13 percent or 518 points, to close at 46,386 points.

Muhammad Saeed Khalid,

head of research at Shajar Capital said the stock market in the upcoming week would perform mainly on the national consumer price index numbers where the economists are expecting a robust decline for the month of January 2021.

“We also believe that the cement industry will perform mainly on the expected announcement of industry sales volumes.”

He also said that the numbers of the oil marketing companies’ would likely show a rising trend in the month of January 2021, which was expected to improve

sentiments in the sector, Khalid added.

Tahir Abbas, director research at Arif Habib Ltd, said, “We expect the market to remain green in the midst of the ongoing result season, whereby corporate profitability appears strong.”

In addition, improved liquidity in the market (translating in augmented volumes / value), would also keep the index trajectory positive.

Albeit, a key event next month includes the Financial Action Task Force (FATF) meeting, which would determine Pakistan’s status (exit from the grey list or status quo). This might trigger some volatility in the market. “We advise investors to invest in long-term blue chip scrips.

The KSE-100 index is currently trading at a PER of 7.7x (2021) compared to Asia Pacific regional average of 16.7 multiple,” Abbas added.

Umair Naseer at BMA Equity Sales desk said, “Considering the unchanged policy rate, upcoming vaccine rollouts and ongoing results season, we believe the market will sustain its upward trend going forward as well.”

PIB (fixed rate) auction has also been scheduled for next week, in which the government plans to raise Rs100 billion. “On the other hand, we continue to prefer banks, E&Ps, fertilisers, automobiles, and cements,” Naseer added.

During the week, average volumes clocked in at 674 million shares, up 33 percent week-on-week, compared with the preceding week, whereas average value traded on the last two consecutive days of the week settled at $169 million, up 44 percent week-on-week compared with the previous week.

Foreign investors sold equities worth $9.1 million compared to a net buy of $5.5 million last week. Major selling was witnessed in commercial banks ($2.7 million) and technology ($2.6 million).

On the local front, major buying was reported by Individuals ($8.7 million and companies $8.1 million).

Sector-wise positive contributions came from cement (326 points) given price hike in the northern region, technology and communication (201 points) amid foreign interest witnessed during the week, pharmaceuticals (70 points), and power generation and distribution (60 points).

Sectors that contributed negatively, included commercial banks (166pts), oil and gas exploration companies (81pts), and fertiliser (54pts).

Top scrip-wise contributors were TRG (216 points), Lucky Cement (84 points), and Fauji Cement Company Limited (59 points).