Market to move sideways searching for triggers

Stocks strengthened by more than three percent drawing support from rupee recovery, fresh loans received from multilateral lenders, and a drop in the new COVID-19 cases, while market is seen trading sideways, searching for handy triggers, dealers said.

Pakistan Stock Exchange's (PSX) benchmark KSE-100 shares index surged 3.3 percent or 1,112 points to close at 35,051 points.

An analyst from BMA Capital Management, said, “Going forward, we see that the flattening of the curve amid slowing pace of arrivals of new COVID-19 cases is likely to provide support to investor confidence”.

Moreover, increasing comfort on rupee front due to increasing foreign exchange reserves will also be crucial, he said.

"We believe the market is currently trading at attractive levels, where we suggest gradual accumulation of fundamentally sound scrips to achieve significant gains in the medium to long run,” he said.

Habib Metro-Financial Services in a note said, “We expect the equity market to trade sideways searching for near term triggers, while any spike in buying by retirement funds can bolster the benchmark”.

Moreover, it said, clarity in fundamentals from the upcoming earnings season would help give the market much needed direction, “which warrants us to maintain a cautiously optimistic stance”.

Average volume during the outgoing week was around 251 million shares, up 43 percent, while average traded value clocked in at $51 million, up by 45 percent.

An analyst from Arif Habib Limited, said, “We expect the market to remain positive in the upcoming week. With COVID-19 cases reducing on daily basis along with higher recovery rate we expect investor confidence to improve”.

The future inflow of funds, SBP’s (State Bank of Pakistan) foreign reserves are expected to swell up, which would stabilise PKR/USD parity, the analyst said.

Despite the terrorist attack at Pakistan Stock Exchange building, potential triggers of this optimism were likely clarity over foreign exchange reserve buffer, muted political noise, and smooth approval of federal budget without much resistance.

The market commenced on a positive note during the outgoing week amid rally in OMC (oil marketing companies) scrips due to rise in petroleum prices followed by increase in international oil prices (leading to upward movement in oil gas exploration and production sector).

Furthermore, approval of Federal Budget 2020-21 in National Assembly, monetary funding worth $500 million from World Bank and loan from Chinese banks of $1.3 billion led to higher investor sentiment.

Moreover, inflation for June 2020 of 8.59 percent remained in line with expectations. Besides this, urea offtake, surging to 76 percent month-on-month in June 2020, added fuel to the sentiment.

Additionally, foreign reserves held by SBP jumped up to $11.23 billion, after receiving monetary funds from multilateral institutions last week, after improved domestic currency.

Foreign selling continued this week clocking in at $20.5 million compared to a net selling of $9.9 million last week.

Selling was witnessed in commercial banks ($8.8 million) and exploration and production ($3.9 million).

On the domestic front, major buying was reported by insurance companies ($17.5 million) and companies ($9.6 million).

A reported spike in fertiliser sales helped the sector stay in the limelight as a conundrum regarding the disbursement of subsidy kept demand at bare minimum levels for the last two months.

Sector-wise positive contributions came from commercial (176 points), cements (170 points), oil & gas exploration companies (140 points), fertiliser (136 points), and technology & communication (85 points).

However, sector-wise negative contribution came from automobile parts & accessories (7 points) and textile spinning (4 points).

Scrip-wise positive contributions were led by LUCK (107 points), OGDC (81 points), MCB (72pts), TRG (59 points) and PSO (50 points).