Earnings to lift stocks if Covid cases fall

Stocks are likely to track a slew of corporate results next week as well as signs of recovery, but a ramp-up in virus cases could prove a drag, traders said.

Arif Habib Limited, a brokerage house, said they anticipate the market to be positive next week, given the expectation of strong results in the ongoing result season.

Meanwhile, concerns over the Covid-19 variant outbreak might keep investors on the edge, the brokerage said.

Furthermore, tensions prevailing in the neighbouring Afghanistan amid US army pullout by end of this month could also bring the local bourse under pressure.

Brokers said the market had been trading directionless for a couple of weeks in the absence of any major trigger that could lead it ahead.

There had been a few good results but they too failed to push the market upwards. During the last couple of weeks, foreign investors invested in technology stocks but local corporations and individuals mostly shed their positions.

The KSE-100 Shares Index at Pakistan Stock Exchange (PSX) lost 320 points or 0.7 percent to close at 47,170 points week-on-week. Average volumes clocked in at 307 million shares, down 33 percent, while average traded value slumped 14 percent to $73 million over the last week.

Foreign buying this week hit $4.0 million, compared with a $3.1 million last week. Buying was witnessed in technology ($4.2 million), banks ($0.9 million) and fertiliser ($0.3 million). On the domestic front, major selling was reported by insurers ($6.6 million) and individuals ($3.0 million).

The market commenced the week on a negative note owing to concerns over the massively yawning current account deficit.

Moreover, the recent depreciation of the rupee against dollar (closing at Rs164) kept the momentum weak.

During the week, the market bounced back and cushioned the dip amid robust financial results of some scrips, massive incentives approved by the federal government for technology and telecom sector, robust remittances ($2.7 billion in July 2021) and 104 percent year-on-year surge in passenger car sales last month.

Sector-wise negative contributions came from cement (112 points), oil & gas marketing companies (67 points), oil & gas exploration (52 points), power generation & distribution (41 points) and fertiliser (39 points). Scrip-wise negative contributors were LUCK (43 points), PPL (32 points), HUBC (32 points), PSO (32 points) and OGDC (31 points).

The sectors that contributed positively included technology & communication (47 points) and food & personal care products (37 points). Scrip-wise positive contribution came from TRG (83 percent), MEBL (46 percent), and FCEPL (44 percent).

Besides, trade bodies and analysts criticized a change in the uniform electricity (units) consumption that would not only affect the individuals but also industry.

Ateeq ur Rehman, an economic & financial analyst, said increases in energy rates on the behest of IMF (International Monetary Fund) would make Pakistani products uncompetitive in the international market.

“We are already highly taxed electricity consumers in the region.” Further hike in power tariff would add to the financial hardships faced by the common man, Rehman said.

Other major developments of the week were: trade deficit for July 2021 widened 85.53 percent to $3.1 billion year-on-year, news that Pakistan will get an additional $2.77 billion by IMF on August 23, on account of new global SDR allocation earlier approved by the fund to boost global liquidity to help countries mitigate economic impact of the coronavirus, State Bank of Pakistan held reserves fell $223 million to $17.62 billion, services exports grew by 9.19 percent to $5.937 billion, Lucky got permission to set up an assembly plant for Samsung mobile devices, K-Electric inked 150mmcfd RLNG supply deal with PLL, and textile exports rose 21 percent in FY21.