Stocks to find footing on earnings bets

Security and virus angst kept stocks on a tight leash in the outgoing week; however investors are betting on an earnings season rally in the days ahead, dealers said.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index closed 0.26 percent or 119.15 points higher over the last week to close at 45,305.63 points.

An analyst at Arif Habib Limited said this week trading commenced on a negative note amidst the ongoing third wave of Covid-19 and threat of lockdown.

“However, bulls took charge as positive sentiments were fueled by slowdown in infection ratio and 3.6 percent increase in international oil prices resulting in buying across heavyweights,” the analyst said.

KSE-30 shares index gained 0.28 percent or 52.87 points to close at 18,537.78 points.

Foreigners offloaded stocks worth $1.0 million compared to a net sell of $9.5 million last week. Major selling was witnessed in commercial banks ($1.31 million). On the local front, buying was reported by individuals ($9.77 million).

Average daily volumes and value of traded securities for the outgoing week were down by 10 percent and 18 percent to 368 million shares/day and $100 million/day, respectively.

Ali Zaidi at JS Global Capital said the index closed the range-bound week on a flat note, gaining merely 119 points.

“In light of the rising Coronavirus infections and fatalities in Pakistan, the government has announced strict SOPs for the holy month of Ramadan,” Zaidi said.

On the political front, the government has banned the Tehreek-e-Tabbaik Pakistan (TLP) under the Anti-terrorism Act and has moved the Supreme Court for dissolution of the party.

With regards to economic indicators, March 2021 saw an impressive $2.7 billion inflow of workers’ remittances while the Large-Scale Manufacturing index grew 7.45 percent during 8MFY21.

Furthermore, banking deposits posted growth of 18 percent during 1QCY21, while the auto sector reported record high sales in March.

Overall, the government has revised upwards its FY21 and FY22 growth targets to 2.9 percent and 4.2 percent in the medium-term budget strategy paper.

In a major development, the Economic Coordination Committee has withdrawn the customs duty applicable to cotton yarn imports.

Moreover, foreign exchange reserves with the central bank have reached $16.1 billion, the highest level since July 2017, after reflection of the $2.5 billion raised through Eurobonds.

Contribution to the upside was led by commercial banks gaining 81 points during the outgoing week, technology and communication contributed 78 points, fertiliser (43 points), automobile assemblers (25 points), and oil and gas exploration companies contributed 18 points.

Scrip-wise major gainers were TRG Pakistan (60 points), Fauji Fertilizer Company (60 points), Bank Al Habib (22 points), Engro Fertilizer (21pts), and Habib Bank (20 points).

Whereas, scrip-wise major losers were Engro Corp shedding 47 points, Hub Power Company (27 points), Pakistan State Oil (27 points), Searl Pakistan (21 points) and DG Khan Cement knocked 20 points off the index.

Going forward, analysts expect the market to remain bullish in the upcoming week.

With the commencement of result season, analysts believe oil and cyclical sectors will be under limelight on the back of healthy earnings expectations.

Additionally improvement in macroeconomic indicators and appreciation of rupee-dollar parity will keep investors’ sentiments positive.

However, any further increase in domestic Covid-19 infection ratio may dampen investor’s sentiments.