Stocks to fare well on budget stimuli faith

Stocks were on a roll in the outgoing week, topping 48,000 points after four years, as investors mostly put faith in the budget stimuli with the trend largely seen enduring, dealers said.

The KSE-100 Shares Index, the benchmark of Pakistan Stock Exchange (PSX) gained 2.3 percent or 1,085.41 points to close the week ended June 4, 2021 at 48,211.70 points.

Average daily volumes arrived at 1.12 billion shares, down 9.4 percent, while average value of traded shares clocked in at $192 million up 7.9 percent.

KSE-30 Shares Index gained 1.8 percent or 355.17 points to close at 19,654.65 points.

An analyst at Arif Habib Limited (AHL) noted the market was mainly fueled by expectation of favorable budgetary measures for the capital market, and for economic growth under the FY22 budget.

Likewise, tax revenue collection hit a historic high of around Rs4.143 trillion during 11MFY21 further driving the market, the analyst said.

Additionally, inflation clocked in at 10.87 per cent, lower than expected.

“Declining Covid-19 cases and upward revision in growth estimates continued to fuel the positive sentiments,” Amreen Soorani, an analyst at JS Global Capital said.

Foreign portfolio investors offloaded $0.2 million worth of securities during the outgoing week, compared to a net inflow of $2.1 million last week.

Foreign selling was witnessed in E&P (exploration and production) stocks ($2.7 million) and power generation & distribution (2.4 million).

Sector-wise, engineering gained 9.6 percent, autos 6.6 percent and oil & gas marketing companies 6.3 percent to be the key outperformers.

Refineries, up 6.1 percent, also beat the benchmark index on expectations the refinery policy will be announced soon, while the rally in cements, up 3.2 percent, has been attributed to anticipation of strong sales growth during May 2021.

It may be mentioned here the government had completed the first payment disposing Rs89.2 billion among 20 Independent Power Producers (IPPs) as according to Adviser on Petroleum and Energy Tabish Gohar, the government intends to resolve the longstanding issue of circular debt permanently.

The finance division has completed this transaction in coordination with relevant organisations, departments including State Bank of Pakistan (SBP) and power division. An analyst at Pearl Securities said the market remained positive during the week on the back of central bank’s monetary policy status quo at 7.0 percent, Fitch Ratings forecast that Pakistan’s growth was likely to stabilise at 4.0 percent in the next fiscal year, a 14 percent growth in country’s exports to $22.6 billion in 11MFY21; however, merchandise trade deficit in May 2021 ballooned 134 percent.

Arab Light prices during the week inched up 2.0 percent, settling at $70.87/bbl, which helped fuel performance of E&P scrips.

Going forward, the market is seen in the positive territory owing to the continuous decrease in Covid cases along with the optimistic budget expectations. “We expect the market to remain positive, with the view of a positive budget for the market scheduled for June 11th; however, we cannot rule out short term dips in the market due to COVID-19,” brokerage Arif Habib Ltd noted.