Weekly Review: stock market may maintain positive momentum

KARACHI: The stock market may maintain positive momentum during the next week owing to improvement sentiments and ease in cases related to COVID-19.

Analysts at Arif Habib Limited expect the market to maintain its positive momentum in the coming week.

Investor’s sentiment is expected to improve further on account of continuous decline in COVID-19 cases on a daily basis.

Moreover, with the SBP’s foreign exchange reserves climbing up, they expect the PKR/USD parity to stabilize.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 7.7x (2020) compared to Asia Pacific regional average of 13.1x and while offering DY of ~6.2 percent versus ~2.7 percent offered by the region.

The market commenced on a positive note this week given flattening of the COVID-19 curve along with higher recovery rate of patients.

Furthermore, jump in SBP’s foreign exchange reserves (up by USD 811 million), reduction in mark-up on Long Term Financing Facility (from 6 percent to 5 percent) and Temporary Economic Refinance Facility (from 7 percent to 5 percent) as well as extension in deferment of principal amount facility pushed the index beyond 36,000 points level.

Moreover, surge in cement sales by 30 percent YoY in June 2020, fall in trade deficit by 27 percent YoY in FY20 and 19 percent YoY higher sales of OMCs during June 2020 added fuel to the sentiment.

The index settled at 36,190 points, gaining 1,139 points (up by 3.3 percent) WoW.

Sector-wise positive contributions came from i) Commercial Banks (495 points), ii) Cement (141 points), iii) Oil & Gas Exploration Companies (135 points), iv) Automobile Assembler (82 points) and v) Oil & Gas Marketing Companies (69 points).

Whereas, negative contributions came from Power Generation and Distribution (23 points) and Fertilizer (17 points). Scrip-wise positive contributions were led by HBL (141 points), PPL (70 points), UBL (65 points), NBP (46 points) and INDU (43 points).

Foreign selling continued this week clocking-in at USD 9.5 million compared to a net sell of USD 20.5 million last week.

Selling was witnessed in Commercial Banks (USD 2.9 million) and Cement (USD 2.3 million). On the domestic front, major buying was reported by Insurance Companies (USD 4.6 million and Companies (USD 2.8 million).

Average volumes settled at 349 million shares (up by 39 percent WoW) while average value traded clocked-in at USD 74 million (up by 44 percent WoW).

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