Stocks likely to fare well on stability bets

Stocks during week remained torn between positives like loan approvals and negatives like end of tax breaks and rising virus cases, but are seen rallying betting on external stability, dealers said.

The KSE-100 shares index gained 1.38 percent or 620.32 points to close the week at 45,521.63 points. KSE-30 shares index shed 1.32 percent or 245.41 points to close at 18,722.08 points.

Ali Zaidi at JS Global Capital said in a major development, the Executive Board of the IMF officially resumed the Extended Fund Facility, approving a $500 million tranche for Pakistan.

“In order to resume the program, the government has had to take some difficult decisions including, but not limited to, revoking a number of tax exemptions allowed to the corporate sector.”

Further, the current account deficit for February 2021 clocked in at $50 million, taking the balance so far during the year to a surplus of $881 million, Zaidi said.

Dealers said the central bank’s Monetary Policy Committee announced its decision to hold the key interest rate at 7.0 percent, late last Friday, which might have boosted investor sentiments during the week.

Foreign selling this week reached $0.1 million compared to a net buying of $3.0 million last week. Selling was witnessed in technology and communication ($2.1 million) and power generation ($1.2 million). On the domestic front, major buying was reported by broker proprietary ($3.7 million) and mutual funds ($1.7 million).

Average daily volumes reduced 4.0 percent to 463 million shares, while average value of traded securities settled at $159 million up 10 percent on weekly basis.

An analyst at Pearl Securities said during the week, the market remained volatile given improving ties between India and Pakistan, which might lead to restoration of bilateral trade in coming months, decision to release first tranche of power producers’ receivables soon, and preparation of a new policy for oil marketing and refinery companies.

Besides, political situation eased after differences emerged within Pakistan Democratic Movement, and the government announced that no complete lockdown will be imposed in the country which triggered investors' interest at the bourses, Pearl Secrities analyst said.

A report issued by Arif Habib Limited noted in order to comply with IMF conditions an ordinance for withdrawing corporate tax exemptions was signed by the President, which somewhat suppressed sentiment in the bourse.

Furthermore, recent surge in COVID-19 cases also sent the alarm bells ringing, the brokerage said.

During the outgoing week, Bank Alfalah and GoldFin signed strategic agreement, proposals for privatisation of 10 distribution companies were finalised, Pakistan State Oil invited bids for two LNG spot cargoes for May deliveries, and there were reports that Pakistan had hired a group of banks for triple-tranche sale of US dollar dominated bonds.

Analysts expect market to remain positive next week. While strengthening PKR/USD parity and stable external position is consolidating macros, COVID-19 third wave is underway and smart lockdowns are being placed to counter it hence the element of uncertainty cannot be ignored.