PSX to remain stable on hopes of firm oil prices

Trading is likely to remain light throughout the next week, as many investors will give the market a wide berth ahead of an expected status quo in the interest rate regime, dealers said on Saturday.

A stabilize global oil prices could also help lift shares as investors appear increasingly keen to put their money on beaten up energy stocks.

A soft oil prices has been a major driver of financial markets since 2015, hammering energy companies, lowering inflation expectations and reinforcing bets on loose monetary policy by the central bank.

"Stability in oil prices would keep the market moving up," said Zafar Moti, a member of Pakistan Stock Exchange. "The market may add up another 300-350 points next week."

Moti said investors would take fresh positions blue-chip stocks including cement, fertilizer, oil and bank.

 "Apparently there are no more cuts in the interest rate in the offing and a likely status quo would keep demand for banking stocks on higher side," he said.

The central bank is due to announce its bimonthly monetary policy by next weekend.

The Pakistan Stock Exchange’s benchmark KSE 100-share Index increased 411.24 points, or 1.25 percent, to close at 33,080.40 points during the week.

Average daily volumes fell five percent to 166.8 million shares during the last week. Average daily value dropped 13 percent to Rs7.9 billion ($75 million). Market capitalisation improved Rs36 billion to Rs6.88 trillion.

KASB Securities said the uptick in oil prices in the last two trading sessions has taken investors by surprise. “With oil prices consolidating above $40/barrel mark, the oil and gas sector will continue to enjoy the limelight given low valuation and relative positioning of the investors," brokerage house said in a weekly note.

KASB said it in last monetary policy meeting the central bank watered down the expectation for further easing in interest rate in the near term, which may affect the performance of independent power producers.

Overall, seasonal uptick in volumes and margins sustainability will allow cement companies to show strong earnings in second half of fiscal year 2016. “While banking stocks have been out of favor for quite some time, with the latest update, we think this is time to revisit investment case for big banks," the report said.

Arif Habib Limited termed the policy announcement as “a non-event for the market”

Going forward, the market shall be dictated by short-term triggers, however, foreign selling and unpredictable commodity prices remain risks to the index performance,” it added.

Topline Securities said triggers were absent at the beginning of the outgoing week, but uptick in international oil prices and interest in banking stocks boded well for the market.

On a sector level, general industrials, pharma and bio tech and travel and leisure were among major gainers as they rose in the range of 4.1-7 percent. Major losers were chemicals, which declined 2.6 percent and food producers, which fell two percent.

Foreigners were net sellers of $7.6 million in the outgoing week. However, major buying was seen in cement sector with net buying of $6.5 million, whereas net selling was seen in chemicals with selling of $6.6 million.

Allied Rental Modaraba, Packages Limited, Attock Refinery, E.F.U. General Insurance and Bank Of Punjab were the major gainers while Fatima Fertilizer Compnay Ltd, Gul Ahmed Textile, Lalpir Power Limited, Nishat Power Ltd., and Arif Habib Corporation were the major losers in the benchmark index last week.