Saturday September 18, 2021

Stocks seen in range, underpinned by earnings

July 25, 2021

Caution is likely to keep stocks on a tight leash next week with a positive bias from corporate earnings amid ongoing economic noise, dealers said.

Week-on-week Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index lost 41 points or 0.1 percent to settle at 47,793 points.

“We expect the market to remain range-bound to positive in the upcoming week as the beginning of result season is likely to keep specific companies in limelight,” said a report of Arif Habib Limited, a brokerage house.

It said, on the other hand, E&P (exploration and production) scrips could perform well due to higher international oil prices.

“However, pressure on the external account, rising infection ratio of a novel coronavirus in Pakistan and uptick in CPI in the upcoming months are downside risks to the index performance,” the brokerage added.

Trading activity remained dull during the short week due to eid holidays.

The sentiment remained in check because of economic concerns arising from widening current account deficit, rupee depreciation against, and expected increase in inflationary readings in the upcoming months due to drastic increase in petroleum product prices.

Pessimism at the bourse was further fueled by the rising Covid infection ratio, which forced Sindh government to impose stricter restrictions to curb the spread of virus. Karachi, the provincial capital of Sindh, witnessed a notable surge in its infection ratio to over 20 percent. Average daily volumes and traded value for the outgoing week shrank 32 percent and 26 percent to 318 million shares and $71 million, respectively.

Foreigners offloaded stocks worth $21.02 million compared to a net buy of $4.61 million last week. Major selling was witnessed in all other sectors ($21.95 million) and technology sectors ($0.61 million). On the local front, buying was reported by individuals ($9.02 million) followed by companies ($5.65 million).

Contribution to the downside was led by cements (49 points), food and personal care (19 points), refineries (14 points), technology and communication (12 points), and textile composite (11 points).

Scrip-wise major losers were TRG (30 points), ENGRO (25 points), PSO (14 points), LUCK (12 points), and HBL (11 points).

Scrip-wise major gainers were SNGP (48 points), PSEL (33 points), SYS (23 points), FFC (18 points), and MEBL (16 points).

Among major developments on the economic front were: current account ended FY2021 in deficit, dollar hit nine-month high at Rs161.48, GDP grew faster than ADB forecast in FY21, and foreign direct investment declined 29 percent in the last fiscal year.

Meanwhile, alarms are being raised over the worsening economic conditions in the country.

“Continuous price hike of commodities, rise of cost of everything and inflation have become an economic disaster for the common man. For lifting our people out of poverty, the government should take emergency steps,” said Ateeq ur Rehman, an economic and financial analyst.

Rehman said the government could not keep inflation under check in its third year too, which accelerated significantly higher than the official target and became the biggest concern.

“We are a debt burden country where the government takes further loans for debt servicing and payment of interest, it matters a lot.”

According to ADB, inflation was higher in Pakistan as compared to other South Asian countries, which was alarming from every point of view, he added.

“There has to be some avenue to overcome this state of affair,” Rehman said.