Stocks likely to stay positive next week amid hopes for IMF deal

KARACHI: Given the great performance by the stock market in the outgoing week, analysts expect the market to stay positive in the next week as well.

During the two-day trading week -- the market remained closed for three days on account of Eidul Azha -- stocks performed better amid clarity on the federal budget and hopes for entering into a new IMF programme.

“In the upcoming week, we expect the market to remain positive. Developments related to the IMF will further improve market sentiment,” brokerage Arif Habib Limited stated. “Furthermore, scrips are currently trading at attractive valuations which could entice investors.”

During the two-day trading week, the market sustained its positive momentum, surging from 76,707 points to 78,810 points, closing an all-time high. Investors remain optimistic amid expectations of the new IMF programme; declining inflation; favourable interest rate trajectory; and the shift of funds from fixed income to equities.

Moreover, on Friday, market cap reached the historic level of Rs10.55 trillion, surpassing the previous high of Rs10.45 trillion set in May’17. Additionally, the State Bank of Pakistan’s exchange reserves increased by $31 million WoW to $9.1 billion. The rupee also remained stable against the dollar at 278.5.

The market closed at 78,810 points, marking a significant increase of 2,104 points or 2.74 per cent WoW.

Average volumes arrived at 462 million shares (up by 2.8 per cent WoW), while the average value traded settled at $74 million (up by 21.8 per cent WoW).

Foreign buying was witnessed during the week, clocking in at $0.6 million compared to a net sell of $5.8 million last week. Major buying was witnessed in commercial banks ($2.5 million) and power ($0.8 million). On the local front, selling was reported by mutual funds ($10 million) followed by insurance ($1.3 million).

Sector-wise positive contributions came from commercial banks (1,486 points), power generation & distribution (409 points), fertilizer (151 points), chemical (76 points), and textile (55 points). Scrip-wise positive contributors were UBL (403 points), HUBC (397 points), MCB (278 points), HBL (248 points), and BAHL (193 points).

Meanwhile, the sectors that mainly contributed negatively were cement (89 points), technology & communication (67 points), and OMCs (41 points). Scrip-wise negative contributions came from LUCK (81 points), SYS (66 points), MARI (46 points), Engro (31 points), and PSO (30 points).

Analysts said that although market capitalization increased in rupee terms to Rs10.55 trillion, which was an all-time high, it stood lower in dollar terms. An increase in the rupee terms was because of the devaluation of the Pakistani currency.

Market capitalization stood at around $100 billion in 2017, which remains under $38 billion now, said Khurram Schehzad, an analyst at Alpha Beta Core.

Analyst Nabeel Haroon at Topline Securities said the KSE-100 Index gained 2.74 per cent on WoW basis, as no increase in taxes on income from equities ie capital gains and dividend for filers in the FY25 budget continued to garner investor sentiment. An increase in taxes on other asset classes in the budget and the global ratings agency Fitch’s statement that increase in taxation measures in the budget increased the likelihood of securing an IMF deal also provided support to the market.

Other major news from the week: PM okayed Rs10.69 tariff cut for industries; the formula milk industry urged the government to impose 18pc GST in phases; refineries protested against the move to allow diesel import; Nepra increased the national power tariff by 20 per cent; and authorities ordered a third-party audit of fertilizer companies.