Equity investors eye attractive yields in battered market

Investors are eyeing attractive yields to take bet on with Saudi trade delegation visit and much-awaited current account tally likely to set investment course after the equity market extended losses of the preceding week, dealers said.

Brokerage BMA Capital Management said activities during the next week would largely hinge on details of Saudi investment plans in Pakistan during the high profile Saudi Crown Prince Mohammed Bin Salman’s two day visit.

“This, in addition to easing off of geopolitical tensions, may guide the market direction. Moreover, current account deficit number for January is expected to be released over the upcoming week,” BMA Capital said in a report.

The capital market shed weight during the outgoing week on speculation that loan program of the International Monetary Fund (IMF) would result in some harsh conditions keeping investors on the sidelines. However, some cherry-picking averts bigger declines.

After the Prime Minister’s short meeting with the IMF’s head during his recent visit to Dubai, market participants raised speculations over potential IMF reforms package for Pakistan and remained sidelined from the local equity market.

The KSE 100-Index slipped one percent or 401 points on profit-taking with share values posting a 10 percent gain last month. The downward trend in the Index during the period was mainly driven by commercial banks, oil marketing and fertiliser companies contributing 128, 86 and 70 points to the index decline, respectively.

Upcoming visit of Saudi Arabia’s Crown Prince to Pakistan dominated headlines throughout the week as both countries are expected to sign memoranda of understanding for multibillion dollars investment for which the federal cabinet has already given its nod.

Additional investment projects are also expected to be inked during Malaysian Prime Minister’s visit next month. Moreover, support from utilisation of oil financing facility extended by the Islamic Development Bank has begun to reflect in the country’s foreign exchange reserves as the State Bank of Pakistan’s reserves remained steady at $8.2 billion since the past three weeks vis-à vis average weekly decline of $200 million previously.

Brokerage Elixir Securities said international coal prices cooled down 2.7 percent to close at $82/ton. This helped local cement sector rally and gain almost 3.3 percent. Cherat Cement and DG Khan Cement outperforming their peers improved 5.4 and 5 percent, respectively week on week basis.

Sale of passenger cars was recorded at 19,353 units in January, down 2.9 percent compared to the same month last year. Decline was due to slowdown in economy, interest rate increase making car financing expensive and higher car prices on rupee depreciation and ban on purchase of vehicles for non-filers.

Foreign investors kept the buying spree intact with net buying of $12 million recorded the outgoing week. Locals were net buyers of $5.9 million and insurance companies were net sellers of $3.6 million. “This was the third consecutive week of (foreign) net buying,” brokerage Topline Securities said.