KARACHI: The stock market is expected to maintain a bullish trend in the coming week, driven by strong corporate profitability, according to analysts at Arif Habib Limited. They anticipate that the positive momentum seen in the stock market will continue, as political uncertainty diminishes and confidence in the economy strengthens.
Analysts noted that political tensions have eased, which is likely to support the stock market’s upward trajectory. However, they also cautioned that concerns over inflationary pressures could provide some resistance, potentially tempering the stock market’s gains. The upcoming week may see the stock market react to the Financial Action Task Force (FATF) plenary meeting’s outcome, where Pakistan’s status on the grey list was maintained. Although the status quo was upheld, the efforts by the Pakistani government to counter money laundering were recognized and appreciated, adding a positive sentiment to the stock market.
The domestic bourse showed resilience this week, with buoyant sentiments returning despite the uncertainty surrounding Pakistan’s status on the FATF grey list. Investors remained optimistic, even as political tensions between the government and opposition parties persisted. This optimism was largely fueled by strong corporate earnings, which played a significant role in driving the bullish trend.
The banking sector’s performance was particularly noteworthy, with results exceeding expectations. The sector benefited from a lower-than-anticipated decline in topline revenues, which bolstered investor confidence. Additionally, Pakistan’s Current Account recorded another surplus in September 2020, closing the first quarter of FY21 with a surplus of $792 million, the highest in 17 years. This positive economic indicator, coupled with the appreciation of the Pakistani Rupee against the U.S. Dollar to PKR 161.4/USD (+0.7% WoW), a five-month high, further supported the market’s bullish stance.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) surged by 1,102 points on a week-on-week basis, representing a 2.7% increase. Sector-wise, the most significant contributions to the index’s rise came from Commercial Banks, which added 240 points, followed by Fertilizer (230 points), Cement (226 points), Automobile Assemblers (73 points), and Technology & Communication (64 points).
Leading the scrip-wise contributions were ENGRO, which added 136 points to the index, followed by Bank Al Habib Limited (BAHL) with 133 points, Engro Fertilizers Limited (EFERT) with 61 points, Lucky Cement (LUCK) with 60 points, and Meezan Bank Limited (MEBL) with 57 points.
Despite the positive domestic sentiment, foreign investors continued to sell, with net foreign selling amounting to USD 6.9 million this week, compared to USD 2.7 million in the previous week. The bulk of the selling was concentrated in the Cement (USD 4.3 million) and Fertilizer (USD 2.0 million) sectors. On the domestic front, Mutual Funds and Companies were the major buyers, with net purchases of USD 7.6 million and USD 4.8 million, respectively.
Trading activity also saw a significant increase, with average volumes rising by 57% WoW to 466 million shares, and the average value traded climbing by 59% WoW to USD 98 million. This surge in trading activity underscores the market’s renewed optimism and the potential for further gains in the coming week.