Investors look to earnings for direction next week

Market focus is likely to shift from macro to micro next week after the central bank kept its policy rate unchanged and earnings reports by blue-chip companies will take the center-stage, dealers said.

The upcoming week will be dominated by earnings, as big fertiliser and several notable auto names lead the pack in what has so far been a middling earnings season, save for some giants that could far exceed expectations.

“Given how strong last week was, and we are going to get into the heart of the earnings season, the market has been relatively resilient," said an analyst.

A sharp cut in petroleum products' prices and reduction of Rs3/unit in the electricity tariff for the industrial users may ease pressure from the cement and fertiliser stocks.

"The status-quo in interest rate (at six percent) would invite buying in undervalued banking stocks," said Farhan Mansoori at Arif Habib Limited.

Faisal Shahji at Standard Chartered Securities said investors would bet on banking stocks ahead of their financial results. "Banks' results are important and the market expects some good cash dividend," he said.

Shahji said banks' earning would not take a hit at least this year due to several rates cut by the central bank since November 2014. "Banks have invested heavily in the long-term government papers like PIBs (Pakistan Investment Bonds)," he said.

KASB Securities, in a market note, said the next week may be shortened by a general holiday on Friday. "The earnings announcements of few big tickets will be unveiled next week which should generate stock specific activity."

Analysts said recovery in international oil prices over the week also lent relief to the local bourse.

The market can also take cues from the scheduled meeting between the government and the International Monetary Fund to make tenth review under the Extended Fund Facility of $6.4 billion, they added.

In the outgoing week, the benchmark KSE 100-share Index rose 349.57 points, or 1.12 percent, to close at 31,298.60 points.

The average volumes declined 21 percent to 116.8 million/day. The average value dropped 13 percent to Rs7 billion/day. And, the market capitalisation decreased a total of Rs93 billion in the week to Rs6.69 trillion.

Foreign investors offloaded stocks worth of $7 million (in net) during the week. Cement sector attracted the most attention with net buying of $6.8 million. Major selling was seen in banks and electricity sector with net selling of $6.4 million and $2 million, respectively

Major gainers were Ibrahim Fibers, Pakistan Tobacco Company, Pakcem Limited, Archroma Pakistan Ltd and D.G. Khan Cement, while major losers were Ferozsons Laboratories, Nestle Pakistan Limited, Shifa Int Hospitals Ltd, Habib Bank Limited, and Hum Network Limited, said KASB Securities.