Weekly Review: Equity market likely gain on improved economic indicators

KARACHI: The stock market likely to remain positive due to improved macro-economic position on the back of enhanced inflows in debt securities and rising foreign exchange reserves.

Analysts at Arif Habib Limited said that the market to remain positive on the back of improving macroeconomic position, country witnessing foreign net inflows in debt securities to $2,588 million in FY20TD, rising foreign exchange reserves improving investor’s sentiments, and stable market determined exchange rate.

Moreover, with the likelihood of Pakistan to get out of FATF’s grey list, investor sentiment should remain upbeat.

The KSE-100 is currently trading at a PER of 7.3x (2020) compared to Asia Pac regional average of 12.5x while offering a dividend yield of ~6.4 percent versus ~2.7 percent offered by the region.

This week trading commenced on a negative note attributable to OGRA’s proposing gas price hike coupled with government’s decision to eliminate GIDC on fertilizer sector to reduce prices of Urea which may hurt bottom line of some companies due to different type of gas tariffs.

On the other hand, Oil and Gas Exploration sector remained under pressure amid decline in international oil prices by 2 percent WoW coupled with appointment of financial advisor to sell stake of OGDC.

Meanwhile, increase in prices of key commodities like wheat and sugar is set to elevate headline inflation with a stronger force considering their weights in CPI index.

As a result, the benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed below 43,000-mark at 42,633 points, decreasing by 535 points or 1.24 percent WoW.

Contribution to the downside was led by i) Fertilizer (-204 points) due to removal of GIDC, ii) Commercial Banks (-87 points) amid profit taking, iii) Oil and Gas Marketing Companies (-71 points), iv) Oil and Gas Exploration Companies (-61 points) due to decline in international oil prices, and v) Tobacco (-61 points). Scrip wise major losers were ENGRO (-153 points), OGDC (-93 points), EFERT (-80 points), PAKT (-53 points), and HMB (-36 points). Whereas, scrip wise major gainers were FFC (+56 points), MARI (+48 points), and COLG (+27 points).

Foreigners accumulated stocks worth of $4.81 million compared to a net buy of $2.81 million last week.

Major buying was witnessed in Oil and Gas Marketing Companies (USD +7.73 million) and Fertilizer (USD +1.88 million). On the local front, selling was reported by Individuals (USD -19.31 million) followed by Broker Proprietary Trading (USD -3.05 million).

That said, average daily volumes for the outgoing week were down by 31 percent to 187 million shares likewise value traded decreased by 10 percent to USD 51.3 million.

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