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Weekly Review: market likely move positive on expected earnings

KARACHI: The stock market may respond positively during the next week owing to expected healthy financial earnings.

Analysts at Arif Habib Limited said that the market will remain positive in the upcoming week given the continuation of the result season, where we expect healthy earnings.

Furthermore, FATF’s review of Pakistan’s progress on the Action Plan (meetings between February 22 and February 25, 2021) will be a key event for the market.

A decision to remove Pakistan from the grey list will likely be received very well by market participants.

Moreover, with the inflow of Remittances from abroad, the Pak Rupee is expected to remain stable.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.3x (2021) compared to Asia Pac regional average of 17.8x and while offering DY of 6.5 percent versus 2.5 percent offered by the region.

The market commenced on a positive note this week. The E&P sector briefly came under the limelight owing to a surge in the international oil prices (Arab Light reaching USD 64.16/bbl on Thursday).

Furthermore, reports of a 19 percent YoY jump in remittances for January 2021 and PM Imran Khan’s rejection of OGRA’s recommendation of hike in petroleum prices kept the sentiment positive.

Furthermore, with the IMF and Pakistan finally reaching an agreement on reforms, which will bring in funds of USD 500 million, further improved investor confidence.

However, bears briefly took over as the investors resorted to profit taking. The market closed at 46,228 points, gaining 419 points (up by 1 percent) WoW.

Sector-wise positive contributions came from i) Technology & Communication (250 points), ii) Cement (138 points), iii) Automobile Assembler (76 points), iv) Fertilizer (57 points) and iv) Oil & Gas Exploration Companies (48 points).

Whereas sectors that contributed negatively include i) Commercial Banks (214 points), Power Generation & Distribution (97 points) and Tobacco (6 points).

Scrip-wise positive contributors were TRG (209 points), LUCK (124 points), MTL (90 points), SYS (40 points) and OGDC (35 points) while negative contributors included HBL (164 points), HUBC (73 points), and MEBL (38 points).

Foreign selling continued this week clocking-in at USD 0.6 million compared to a net sell of USD 3.2 million last week. Selling was witnessed in Commercial Banks (USD 5.1 million) and Technology and Communication (USD 1.4 million).

On the domestic front, major buying was reported by Companies (USD 5.5 million and Individuals (USD 4.9 million). Average volumes arrived at 595 million shares (down by 19 percent WoW) while average value traded settled at USD 159 million (down by 6 percent WoW).