Stocks likely to keep up positive momentum next week

KARACHI: Stocks closed slightly higher during the outgoing week, and the market is expected to keep the positive momentum in the coming week.

“We expect the market to sustain its positive momentum next week, with any developments related to the IMF likely to boost investor sentiment further,” stated brokerage Arif Habib Ltd. “As the earnings season continues, select stocks are expected to gain attention, driven by the anticipation of strong results.”

The week began under slight market pressure due to Pakistan’s absence from the IMF Executive Board’s schedule this month, raising concerns about the disbursement of the tranche. However, sentiments improved midweek when the finance minister announced progress with the IMF, indicating optimism about securing approval from its executive board by September.

The market closed at 78,801 points, marking an increase of 756 points or 0.97 per cent week-on-week. Average volumes arrived at 578 million shares (up 4.6 per cent WoW), while the average value traded settled at $56 million (down by 25.2 per cent WoW).

Foreigner selling was observed during this week, clocking in at $0.62 million compared to a net buy of $5.26 million last week. Major selling was witnessed in fertiliser ($0.92 million); other sectors contributed $0.92 million. On the local front, buying was reported by mutual funds ($3.5 million) followed by banks/DFIs ($3.5 million). Sector-wise positive contributions came from commercial banks (369 points), fertiliser (177 points), cement (134 points), leather (79 points) and refinery (47 points). Scrip-wise positive contributors were FFC (197 points), NBP (164 points), UBL (123 points), SRVI (79 points), and OGDC (75 points).

The sectors that mainly contributed negatively were automobile assembler (40 points), food and personal care products (34 points), technology (20 points), miscellaneous (11 points) and E&P (10 points). Scrip-wise negative contributions came from MARI (108 points), HBL (65 points), MTL (43 points), SYS (41 points), and Engro (35 points).

Nabeel Haroon, an analyst at Topline Securities, said the gain in the index can largely be attributed to decline in yields in the range of 74-148 bps in the T-bill auction held during the week, reflecting investor’s expectation of a possible decline in the policy rate given the downward trajectory of inflation numbers.

An analyst at JS Research, Muhammad Waqas Ghani, said the KSE-100 index displayed positive momentum this week, driven by gains in the last three sessions.

As per PBS data, the large scale manufacturing (LSM) sector showed a year-on-year growth of 0.92 per cent during FY24. According to the latest data, Pakistan’s current account balance recorded a deficit of $162 million in July 2024, a significant 78 per cent YoY decline owing to a high base. Current account also contracted by 48 per cent MoM, largely due to a softening primary income deficit and lower trade balance, which hit a 22-month low.

With the current account in deficit and reduced support from a lower financial account surplus, the balance of payment returned to a deficit, totalling $152 million.

Further, SBP reserves increased by $19 million WoW to $9.3 billion. The Pakistani rupee remained largely stable against the dollar at 278.5.

Moreover, banking sector deposits increased 19 per cent to Rs30.6 trillion in July, car financing in Pakistan dropped for the 25th consecutive month and RDAs attracted $161 million in July.