Bargain hunters gather momentum to cherry-pick undervalued shares

Bargain hunters have made their way into the market to leverage value shares after tough tussle between bulls and bears trampled down price graphs, dealers said, hoping some recovery in the stock exchange aided by IMF triggers.

“A delegation of the IMF (International Monetary Fund) is due to visit in the coming week. Budget progress is expected. April CPI number is

expected that may guide upcoming monetary policy direction,” brokerage BMA Capital said, outlining factors

that would impact the market next week.

A weekly report by Arif Habib Limited anticipated the market to be positive in the coming week. “Attractive valuations can revive investors’ interest.”

The benchmark KSE 100-share index of the Pakistan Stock Exchange touched more than three years lows during the midweek, reaching around the 36,100 level.

However, buyers rescued the capital market from a big blow on hopes

of IMF talks and better financial results.

“The week proved to be a tale of two halves. The first part of the week witnessed market participants giving in to pessimism as it dropped by a cumulative 888 points to close at the lowest level of 36,404 points since July 2016 on Tuesday,” BMA Capital said in a report.

“The latter half of the week witnessed better than expected financial results of blue-chip banking, fertiliser and cement that reignited investor sentiment and as a result the market recovered from its intra-week low to close the week at 37,131 points, down 0.4 percent or 162 points.”

Average daily volume was 122 million shares, while average daily value slid 15 percent to $33 million/day.

Muhammad Faizan, head of Foreign Institutional Sales at Next Capital Limited said cement stocks led the market with majority of them closing at their upper circuit levels.

“Cement prices are expected to increase by Rs15-20 in the northern region effective 1st May.”

Cement sector added 44 points to the index on expectation of recovery in prices. Commercial banks contributed 116 points on robust financials. UBL, up 5.16 percent, gained the most in the banking sector.

Sector-wise, the index corrosion came from pharmaceuticals (94 points) as price hike by domestic manufacturers came under fire by the government, oil and gas exploration companies (64 points), and oil and gas marketing companies (46 points). Shares that remained under pressure included Pakistan Petroleum Limited (down 51 points), Fauji Fertilizer (falling 30 points), Searl (decreasing 29 points), and Pakistan State Oil (dropping 27 points).

Topline Research said foreigners were net buyers of $9.3 million during the week versus net selling of $1.9 million a week earlier.

Among local investors, banks were net buyers of $3.1 million while mutual funds were net sellers of $8.2 million. Companies were net buyers of $3 million.

“Economic clarity continues to evade investors,” Ali Zaidi, an analyst at JS group said.

“Unanticipated reshuffle of the federal cabinet, including removal of the finance minister, at such a crucial stage has had lingering effects on the

market.”