Weekly Review: Equity market to move with escalating Middle East tension

Weekly Review: Equity market to move with escalating Middle East tension

KARACHI: The stock market likely to move with the development in mounting tension in the Middle East following killing of Iranian leader in US air strike.

Analysts at Arif Habib Limited said that market to remain in the green zone next week. Oil scrips may manage to attract the limelight following renewed tension in the Middle East which is likely to fuel international oil prices.

Additionally, fresh portfolio allocations and inflow of funds with the advent of the New Year should support the momentum. The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.4x (2020) compared to Asia Pac regional average of 12.5x and while offering DY of ~6.4 percent versus ~2.7 percent offered by the region.

Overall optimism in the equity markets continued this week. Investors welcomed the New Year with a spectacular two-day rally of 1,746 points on the first two days of the New Year.

Abu Dhabi Crown Prince’s one day visit and continuously improving macros with further improvement in SBP reserves (+5.5 percent WoW) helped to sustain the bullish run of the KSE-100 Index.

Albeit, the last trading day witnessed profit taking in the wake of a US strike in Iraq to kill a key Iranian army commander. Inflation reading for Dec’19 settled at 12.63 percent YoY, declining 0.34 percent MoM. The KSE-100 Index settled at 42,323 points, up 1,475 points WoW.

Sector-wise positive contributions came from i) Commercial Banks (261 points), ii) Fertilizer (218 points), iii) Oil & Gas Exploration Companies (208 points), iv) Power Generation (184 points), and v) Cement (171 points). Whereas, negative sector-wise contribution came from Tobacco (27). Scrip-wise positive contributions were led by HUBC (138 points), LUCK (124 points), ENGRO (102 points), OGDC (85 points) and PSO (79 points).

Foreign selling continued this week clocking-in at USD 7.3 million compared to a net sell of USD 2.9 million last week. Selling was witnessed in Commercial Banks (USD 4.7 million) and Fertilizer (USD 1.4 million).

On the domestic front, major buying was reported by Mutual Funds (USD 8.6 million) and Banks/DFI (USD 4.2 million). Average Volumes settled at 282 million shares (up by 23 percent WoW) while average value traded clocked-in at USD 69 million (up by 29 percent WoW).