Weekly Review: stock market to keep positive momentum

KARACHI: The stock market likely to keep positive momentum next week on the back of improving macro-economic situation.

Analysts at Arif Habib Limited said that reduction in Pakistan Investment Bond (PIB) yields have once again made equities an attractive asset class and with valuations at dirt cheap levels, it is expected the inflection in sentiment to continue.

The rejuvenation of foreign interest in the market is also a major factor that should continue to fuel the positivity.

The KSE-100 index is currently trading at a PER of 5.6x (2020) compared to Asia Pac regional average of 13.1x and while offering DY of ~9.6 percent versus ~2.5 percent offered by the region.

The benchmark KSE100 index commenced on a positive note this week led by the E&P sector on the back of surge in oil prices following the strike on 2 major Saudi oil facilities.

Monday also saw the MPS where the SBP decided to leave the policy rate unchanged at 13.25 percent. This week also saw a PIB auction in which cut-off yields continued to witness attrition (3-Yr: -130bps, 5-Yr: -105bps, 10-Yr: -90bps) while the yield curve continued to exhibit an inverted shape.

The reduction in yields stimulated positivity amongst investors (decline in yields create expectations of a rate cut) which was further cemented by positive statements from the visiting IMF Middle East & Central Asia Director. Moreover, CAD (Current Account Deficit) for the month of August depicted a 9.4 percent MoM decline while 2MFY20 CAD showed a 55 percent YoY reduction. The index closed at 32,111 points (+630 points WoW).

Sector-wise positive contributions came from i) Oil & Gas Exploration Companies (204 points), ii) Commercial Banks (147 points), iii) Fertilizers (98 points), iv) Oil & Gas Marketing Companies (89 points), and v) Pharmaceuticals (56 points). Scrip-wise positive contributions were led by PPL (99 points), HBL (77 points), UBL (72 points), OGDC (63 points) and ENGRO (57 points).

Foreign buying was witnessed this week clocking-in at USD 7.75 million compared to a net buy of USD 1.01 million last week.

Buying was witnessed in Commercial Banks (USD 3.6 million) and Cement (USD 2.0 million). On the domestic front, major selling was reported by Insurance Companies (USD 9.0 million) and Mutual Funds USD 6.8 million.

Average Volumes settled at 123 million shares (down by 5 percent WoW) while average value traded clocked-in at USD 33 million (down by 13 percent WoW).

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