Investors eye political clarity, earnings boost for market recovery

KARACHI: Stocks are expected to recover next week after a sharp drop of 4.9 percent in the outgoing week, as investors hope for political stability and positive corporate earnings, analysts said on Saturday.

“In the upcoming week, we anticipate clarity on the political front which will enhance investor’s confidence,” brokerage Arif Habib Ltd said in a note. “Furthermore, with the ongoing result season, particular stocks are anticipated to garner interest owing to their expected robust financial performance. The scrips continue to trade at attractive levels, which could further entice investors.”

The market remained under pressure during the week amid political uncertainty and IMF rejecting the proposal related to curtailment of the stock of circular debt, due to which investor’s confidence was adversely impacted.

Oil and Gas Regulatory Authority formally notified the first semi-annual gas price hike during the week with a major increase witnessed in protected residential consumers (40-60 percent hike across various slabs) and the fertilizer sector (175 percent rise in feedstock gas prices).

Additionally, in Dec’23 Large Scale Manufacturing Industries (LSMI) output rose by 3.4 percent year-on-year. Also, there was a rise in the prices of petroleum products by Rs2.73 of MS and Rs8.37 of HSD.

Along with this, the remittances surged by 26 percent year-on-year to arrive at $2.4 billion during Jan’24. Moreover, SBP’s reserves inched up by $12 million, reaching $8.1 billion.

During the week rupee closed at 279.36 against dollar, weakening by Rs0.08 or 0.03 percent week-on-week.

The market closed at 59,872.96 points, declining by 3,071 points or 4.9 percent week-on-week. Average volumes arrived at 350 million shares (up by 14.5 percent week-on-week) while the average value traded settled at $ 48 million (down by 3.6 percent week-on-week).

Foreign buying was witnessed during this week, clocking in at $5.2 million compared to a net buy of $5.7 million last week. Major buying was witnessed in exploration & production ($2.2 million) and all other sectors ($1.2 million). On the local front, selling was reported by broker proprietary trading ($5.9 million) followed by banks/DFI ($2.1 million).

Sector-wise negative contributions came from oil & gas exploration companies (1,176 points), cement (288 points), power generation & distribution (287 points), oil & gas marketing companies (216 points) and commercial banks (206 points). Scrip-wise negative contributors were OGDC (730 points), PPL (377 points), HUBC (221 points), PSO (149 points) and LUCK (117 points).

The sector which mainly contributed positively was textile spinning (3 points). Meanwhile, scrip-wise positive contributions came from EFERT (93 points), MCB (33 points), FATIMA (19 points), NATF (14 points), and AGP (9.24 points).

Shagufta Irshad, an analyst at JS Research, said the benchmark index has lost 4,271 points or 7 percent since the Feb 8th elections due to a lack of clarity over the upcoming set-up of the new government. "Dialogues among leaders of pivotal political parties centred on the establishment of a new government and putting forth candidates for crucial positions, was the talk of the town during the week."

Irshad said the political news flow overshadowed the strong corporate earnings and dividend announcements that came during the week.

Ali Najib at Topline Securities said it was a depressing week for the market. “Political uncertainty in the making of new coalition government for next 5 years term & IMF’s disapproval on circular debt management plan & tariff rationalization grabbed the bulls by the horns,” he said.

Investor participation showed mix trend where average daily traded volume and value during the outgoing week stood at 350 million shares (up by 14.4 percent on week-on-week basis) and Rs13.5 billion (down by 3.5 percent on week-on-week basis) respectively.