Corporate buybacks likely to keep stocks up next week

The stock market closed the previous week on a positive note, as traders expect an uptrend to continue in the coming week due to anticipated corporate share repurchases. This is expected to bring in additional liquidity to the market.

The market closed at 42,242 points, gaining 661 points (up by 1.6 percent) week-on-week (WoW). Average volumes arrived at 236 million shares (up by 13 percent WoW) while the average value traded settled at $28 million (up by 13 percent WoW).

“The market is expected to remain positive in the upcoming week given buyback from the companies, which will bring liquidity to the market,” said Brokerage Arif Habib Ltd. “Moreover, the investors will be keeping track of developments with regard to the disbursement and commitment of funds from friendly countries and international creditors, which will bridge the financing gap and bring the IMF programme back on track.”

This week's market got off to a good start thanks to the key industries' strong financial results announcement. The news that HBL's sponsor and LUCK (2nd buyback) will be purchasing shares added to the positive energy.

Furthermore, the news that Pakistan’s trade deficit had reduced by 40 percent year-on-year (YoY) to settle at $24 billion in 10MFY23 contributed in the gains. However, inflation for the month of Apr’23 clocked-in at 36.4 percent YoY, a historic high level.

The rupee appreciated by PKR 0.25| 0.01 percent WoW, settling at Rs283.59 against USD. Meanwhile, the State Bank of Pakistan’s (SBP) reserves arrived at $4.5 billion, down by $6 million WoW.

Foreigners’ selling continued during the week, clocking in at $6.1 million compared to a net sell of $14.2 million last week. Major selling was witnessed in food and personal care ($8.5 million) and other sectors ($0.7 million). On the local front, buying was reported by individuals ($8.0 million) followed by NBFC ($1.5 million).

Sector-wise positive contributions came from commercial banks (252 points), cement (247 points), fertiliser (67 points), food and personal care products (64 points), and paper and board (60 points). Scrip-wise positive contributors were LUCK (167 points), HBL (107 points), UBL (94 points), PKGS (60 points), and EFERT (53 points).

The sectors which contributed negatively were E&P (86 points), technology (51 points), and auto assembler (36 points). Meanwhile, scrip-wise negative contributions came from PPL (40 points), SYS (34 points), POL (24 points), INDU (22 points), and TRG (17 points).

Wasil Zaman at JS Research said the KSE-100 maintained its upward momentum in the outgoing week, following the ongoing dialogue between the government and opposition regarding the election date.

On the news front, SBP reserves declined by $6 million to $4.5 billion, translating into an import cover of one month. Cement dispatches touched a 9-month low dropping 22 percent MoM to 2.95 million tonnes on the back of tough macro conditions.

Despite the sequential improvement of 6 percent, OMC sales remained in a negative territory and went down 47 percent YoY for the month and 24 percent YoY during 10MFY23. On the international front, the US Central Bank further raised interest rates touching a 16-year high as it battles to contain inflation.

Nabeel Haroon at Topline Securities said the market gain could be attributed to the announcement of Lucky Cement Limited's second round of buyback of 23.8 million and Aga Khan Fund for Economic Development declaration of intention to buy Habib Bank Limited shares worth Rs3.5 billion at the start of the week.