Stocks likely to maintain upward momentum amid start of new earnings season

KARACHI: Stocks closed higher to an all-time high index during the outgoing week amid declining inflation and other triggers. The market is expected to maintain upward momentum amid the start of the new earnings season.

“We project that the market will sustain its upward momentum next week with the commencement of the new result season,” stated brokerage Arif Habib Ltd. “Certain scrips are expected to be in focus, driven by the anticipation of robust financial results.”

The market maintained a positive momentum and closed at an all-time high of 83,532 points. This upward trajectory was supported by several significant economic developments: inflation declining to a 44-month low of 6.9 per cent in September, initiation of a buyback of treasury bills worth Rs351 billion by government at significantly reduced rates, the country’s GDP recorded a growth of 2.52 per cent in FY24, driven by growth in the agriculture sector.

The market closed at 83,532 points, marking an increase of 2,240 points or +2.76 per cent week-on-week. Average volumes arrived at 344 million shares (down by 12.1 per cent WoW), while the average value traded settled at $60 million (down by 1.3 per cent WoW).

Foreigner selling continued during this week, clocking in at $26.1 million compared to a net sell of $10.5 million last week. Major selling was witnessed in E&P ($7.2 million) followed by fertiliser ($6.2 million). On the local front, buying was reported by mutual funds ($26.1 million) followed by other organizations ($8.0 million).

Sector-wise positive contributions came from fertilizer (716 points), oil & gas exploration (585 points), commercial banks (297 points), cement (241 points) and oil & gas marketing companies (122 points). Scrip-wise positive contributors were FFC (512 points), PPL (222 points), OGDC (212 points), UBL (108 points), and POL (98 points).

The sectors that mainly contributed negatively were engineering (40 points), glass & ceramics (13 points), pharmaceuticals (9 points) technology & communication (6 points) and chemical (4 points). Meanwhile, scrip-wise negative contributions came from TRG (34 points), INIL (26 points), KAPCO (25 points), EPCL (19 points), and ISL (16 points).

Abdul Basit, an analyst at JS Research, said the KSE-100 index continued its bullish momentum. “Despite the significant foreign outflows of approximately $26 million during the week, the index remained elevated driven by off-setting local buying mainly led by mutual funds amid positive economic developments,” he said.

Pakistan’s ongoing sharp disinflation trend continue with an almost four-year low CPI reading in September-2024; the CPI tumbled to 6.9 per cent (lowest since Jan-2021). Also, as per the latest figures, SBP reserves increased to $10.7 billion, being at 29-month high levels after the disbursement of the IMF’s first tranche of 37-month Extended Fund Facility.

Further, the trade deficit widened by 4.0 per cent YoY in 1QFY25, whereas exports went up 14 per cent YoY during the same period. The FBR missed the revenue collection target by Rs87 billion during 1QFY25 with actual collection standing at Rs2,452 billion against the target of Rs2,539 billion.

Furthermore, the Pakistani rupee appreciated against the USD, closing at 277.5.

Analyst Nabeel Haroon at Topline Securities said the increase in the KSE 100 index can be attributed to the CPI inflation number for September 2024 which clocked in at 6.9 per cent (vs 9.6 per cent in August 2024), following which yields came down sharply in the money market.