Stocks expected to remain bullish on upbeat earnings

Stocks market is expected to remain bullish with the result season commencing from next week and cyclical sectors will remain in the limelight on the back of healthy earnings expectation, analysts said on Saturday.

Keeping in view the smart lockdowns in place in hotspot areas and aggressive vaccination drive by the government, a complete lockdown is unlikely, they said.

With the Eurobonds proceeds helping SBP reserves cross $16 billion (highest level since July 2017), rupee-dollar parity will remain strong.

During the week ended April 9, the KSE-100 managed to recover after a couple of sharp dips to close with a weekly gain of around 2 percent.

An analyst at Arif Habib Limited said the market commenced on a negative note this week as 5,000 Covid cases were reported daily, due to which hotspot areas were again under smart lockdown and business timings were reduced.

IMF and World Bank forecasted GDP growth at 1.5 percent and 1.3 percent, respectively in FY21, which are lower than State Bank of Pakistan’s projection of 3 percent.

“Further, news came in regarding extension of the debt servicing suspension initiative till December 2021 which

was welcomed in the local bourse. Alongside this, expectation of robust quarterly results kept the index in the green,” he said.

The KSE-100 shares index gained 1.99 percent or 885.53 points to close the week at 45,186.48 points. KSE-30 shares index shed 1.73 percent or 314.57 points to close at 18,484.91 points.

Average volumes arrived at 410 million shares/day up 9 percent, while average value of traded securities settled at $122 million, down 9 percent.

Analyst Ahmed Lakhani at JS Global Capital said the country received $500 million as a part of IMF’s debt.

“There was a flurry of adverse news as well regarding the new benchmarks of the IMF package and upwards revision of inflation estimates by the lender for Pakistan in its forecasts shared in the World Economic Outlook’s document,” he said.

Foreign selling continued this week clocking-in at $9.5 million compared to a net sell of 4.9 million in the previous week. Selling was witnessed in commercial banks ($4.2 million) and fertilizer ($3.0 million).

On the domestic front, major buying was reported by banks and financial institutions ($3.2 million) and companies ($2.5 million).

On the political front, things remained on the mellow side, with conciliatory tones being used by certain corners towards the opposition.

Moreover, the announcement of receipt of $2.5 billion by the SBP in lieu of Eurobond issuance provided markets a reason to cheer towards the end of the week.

However, the third wave of spike in coronavirus infections continued, which could keep the index in check during the near term.

Cements gaining 5.5 percent during the week remained among the top performers, given recent dispatches data showing robust growth.

The KSE-100 index is currently trading at a PER of 6.8x (2021) compared to Asia Pacific regional average of 16.4x and while offering discounted yield of 7.1 percent versus 2.6 percent offered by the region.