Stocks to bet on PSDP-led cyclical boom

KARACHI: Stocks are seen swinging up ahead betting on higher Public Sector Development Programme (PSDP) allocation led cyclical sector boom, dealers said.

The KSE-100 Shares Index at Pakistan Stock Exchange closed at 47,686 points, up 0.2 percent or 83 points week-on-week.

Brokerage Arif Habib Limited in its weekly stock review said the market was expected to perform well in FY22 on account of robust earnings growth forecast of cement, steel and allied sectors amid strong cyclical demand driven by historic high PSDP allocation and focus on Naya Pakistan Housing scheme, expectation of an Auto and Refinery policy, downwards sticky oil prices supporting the E&P sector, and commencement of monetary tightening, which should once again garner interest in commercial banks.

The market also gained momentum on the first day of the new fiscal year, erasing previous losses.

Average volumes arrived at 622 million shares, down 10 percent week on week, while average traded value settled at $107 million, down 4 percent week-on-week.

The market remained range-bound during the week with volatile trading on account of June-end closing and adjustment of portfolios. Moreover, as the debate on the Federal Budget moved towards final stages in the Parliament, some stiffness was witnessed in the political climate. Nevertheless, the budget was passed with a majority vote.

Foreign selling continued this week, clocking-in at $8.4 million compared to a net sell of $7.9 million last week. Selling was witnessed in commercial banks ($3.2 million) and other sectors ($1.4 million).

On the domestic front, major buying was reported by individuals ($13.6 million) and companies ($13.4 million).

Power sector’s circular debt affected the market sentiment, which reached up to Rs2.380 trillion by April 2021. For payment of circular debt, the IMF has allowed 10 percent provision in budget to be included as “circular debt surcharge” whereas the Finance Minister Shaukat Tarin has suggested to reduce it by growing demand of electricity through industrial growth in 6 to 7 years.

“Sustaining a time bomb for 6 to 7 years is not appropriate, it will not only include heavy interest added to countries annual debt servicing repayments but also the ever-increasing burden of debt,” said Ateeq Ur Rehman, an economic and financial analyst.

“This is a serious matter. The government should identify and rectify the defects and go for a solution for stopping the circular debt to further pile up and abstain from passing on this burden to consumers or common men.”

“We are highly taxed electricity consumers in the region. Relief by the government on electricity tariff will reduce the extreme financial hardships faced by human lives in the country,” Rehman added.

Sector-wise positive contributions came from technology (105 points), pharma (68 points), food and personal care (51 points), tobacco (22 points), and insurance (14 points). Whereas, the sectors that contributed negatively were commercial banks (46 points), power generation & distribution (44 points), oil & gas exploration companies (39 points), oil & gas marketing (36 points) and refineries (18 points).

Scrip-wise positive contributors were TRG (88 points), AGP (54 points), LUCK (41 points), UNITY (37 points) and MEBL (25 points). Scrip-wise negative contributors were HBL (67 points), HUBC (65 points), UBL (38 points), OGDC (35 points), and HASCOL (34 points).