Stocks likely to maintain upward momentum amid earnings season

KARACHI: Pakistan stocks closed higher during the outgoing week, and the market is expected to keep up the positive momentum next week amid earnings season.

“We expect the market to remain positive in the upcoming week,” said brokerage Arif Habib Ltd. “With the result season commencing next week, certain scrips are expected to be in the spotlight, driven by the expectation of strong financial results.”

The market displayed remarkable performance this week by reaching an all-time high of 85,669 points at closing on Wednesday. Scrips such as OGDC and PPL remained in prime focus throughout the week, given their latest published detailed accounts reported almost 100 per cent cash sales in 4QFY24, with the accumulation of circular debt halted.

The market closed at 85,483 points, marking an increase of 1,951 points or 2.34 per cent WoW. Average volumes arrived at 523 million shares (up by 52.2 per cent WoW), while the average value traded settled at $107 million (up by 78 per cent WoW).

Foreigner selling continued during this week, clocking in at $22.6 million compared to a net sell of $26.1 million last week.

Major selling was witnessed in foods and personal care ($18.0 million) followed by power ($7.7 million). On the local front, buying was reported by mutual funds ($18.9 million) followed by insurance ($10.7 million).

Sector-wise positive contributions came from commercial banks (1,015 points), E&Ps (628 points), fertilizer (328 points), OMCs (288 points) and pharmaceuticals (120 points). Scrip-wise positive contributors were OGDC (308 points), PPL (280 points), BAHL (208 points), PSO (204 points) and MCB (175 points).

The sectors that mainly contributed negatively included power (570 points), cement (58 points), automobile parts & accessories (15 points), textile composite (14 points) and insurance (11 points). Scrip-wise negative contributions came from HUBC (574 points), LUCK (245 points), MARI (83 points), AIRLINK (34 points) and MEHT (31 points).

Analyst Wadee Zaman at JS Research said the KSE-100 continued its bullish momentum throughout the week, posting a significant growth of 2.3 per cent WoW, closing at 85,483 points.

Despite the significant foreign outflows of approximately $23 million during the week, the index remained elevated driven by off-setting local buying mainly led by mutual funds and insurance companies amid positive economic developments.

The main highlights of the week were the termination of five IPP contracts, including Hubco’s base plant.

Also, during the visit of the Saudi delegation to Pakistan, MoUs worth $2.2 billion were signed across various sectors. There was also notable progress on the Reko Diq project, with the Saudi minister of investment announcing that Manara Minerals is poised to acquire a stake in the project.

Nabeel Haroon, analyst at Topline Securities, said the gain in the market can be attributed to the flow of funds towards equity in the backdrop of an overall decline in yields on fixed-income securities. Buying was largely led by mutual funds, as they net purchased equities worth $18.38 million during the week as of Thursday’s close.

Other major developments during the week were: Pakistan’s worker remittances in September 2024 clocking in at $2.85 billion (up 29 per cent YoY).

Moreover, the government executed a buyback of T-bills amounting to Rs475 billion, while net investments through the RDA reached $1.532 billion. The State Bank of Pakistan’s (SBP) reserves reached the highest since April 22 to $10.8 billion (up by $106 million WoW). Meanwhile, the rupee depreciated against the dollar by 0.12 or 0.04 per cent WoW, closing at 277.5.

Another significant development took place whereby Ogra proposed an increase in margins of about Rs1.35/litre for OMCs. PAMA also released auto numbers for September 2024, where passenger car sales increased by 22 per cent year-on-year (YoY).