Weekly Review: stock market likely to stay positive

Weekly Review: stock market likely to stay positive

KARACHI: The stock market likely to stay positive in the coming week owing to expectation of ease in money market yields.

Analysts at Arif Habib Limited said that the market to remain positive in the upcoming week.

With recent injection by the State Bank of Pakistan (SBP) via Open Market Operation (OMO) for 63 days, money market yields are expected to come down further.

READ MORE: Stocks gain 169 points on SBP’s OMO

This is most likely to reignite investors’ interest in the stock market. Furthermore, scrips have opened up to attractive valuations.

Moreover, mini budget expected to be announced soon, where the market is expected to react to any introduction, re-imposition or removal of duties and subsidies.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 4.7x (2022) compared to Asia Pac regional average of 14.9x while offering a dividend yield of ~8.8 per cent versus ~2.2 per cent offered by the region.

The market commenced on a negative note amid anticipation of a massive hike in policy rate. Moreover, expectation of announcement of mini-budget further dented the sentiment.

However, market recovered post Monetary Policy announcement as clarity was provided by the SBP in its forward guidance suggesting no further hike in near-term.

READ MORE: Key policy rate goes up to 9.75%; SBP raises 250bps in less than month

Along with this, SBP also disclosed that it is close to achieving mildly positive real interest rate, which further boosted investor sentiment (index going up by 1,200 points on Wednesday). 

In addition, on the external front, growth in remittances by 9.7 per cent to USD 12.9 billion in 5MFY22 was a positive development. However, bears returned as investors resorted to profit taking.

READ MORE: Pakistan’s remittances fall by 6.6% in November 2021

Furthermore, the USD/PKR Parity witnessed another all-time low of PKR 178.04. The market closed at 43,901 points, gaining 505 points (up by 1.2 per cent) WoW.

READ MORE: Dollar hits record high of Rs178.04 at interbank closing

Sector-wise positive contributions came from i) Cement (282 points), ii) Technology & Communication (173 points), iii) Textile Composite (74 points), iv) Engineering (70 points), and v) Refinery (50 points). Whereas, sectors which contributed negatively were i) Commercial Banks (208 points) and ii) Fertilizer (17 points). Scrip-wise positive contributors were TRG (112 points), LUCK (111 points), MLCF (45 points), SYS (43 points) and CHCC (36 points). Meanwhile, scrip-wise negative contribution came from MCB (71 points), UBL (63 points) and MEBL (29 points).

Foreign selling continued this week, clocking-in at USD 3.5 million compared to a net sell of USD 0.99 million last week. Major selling was witnessed in Cements (USD 1.9 million) and Technology and Communications (USD 1.9 million). On the local front, buying was reported by Companies (USD 5.1 million) followed by Individuals (USD 2.7 million). Average volumes clocked-in at 265 million shares (up by 30 per cent WoW) while average value traded settled at USD 84 million (up by 13 per cent WoW).

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