PSX upswing to sustain on results strength

Stocks in week reclaimed a big deal of lost gains on bargain-hunting amid rising global equity and oil markets, while this trend is highly likely to continue in the quarterly earnings season where some robust results are much hoped for, dealers said.

On a week-on-week (WoW) basis, Pakistan Stock Exchange's (PSX) KSE-100 shares index closed 1.86 percent or 727.6 points higher in the outgoing week and closed at 40,798 points. The index touched a peak of 40,830 points and a low of 38,569 points during the week. Average volume was recorded at 417 million shares (up 7 percent WoW), while average traded value settled at $81 million (down 2 percent WoW).

Brokerage Arif Habib Limited in a research note said, “The market is expected to remain green due to higher interest of local individuals, expectation of better results especially on cements, OMCs, E&Ps, autos, textile, technology, steel, chemicals, and consumer goods, improving macroeconomics , strengthening rupee, and a low daily COVID infection rate”.

On the other hand, upcoming key announcements like automobile sales data might attract investors’ interest in auto sector, the brokerage added.

“However, FATF outcome expected this month, higher current account deficit expected for September 2020, political uncertainty, and increase in gas and electricity tariffs are going to be the key concerns,” it said.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said, “The index gained as attractive valuations triggered a buying spree”.

“Improvement in industrial data provided much-needed support to stocks, as investors expected economic activity to recover to pre-COVID levels", he said.

On the political front, matters remained bleak as rift between government and opposition continued to widen with the latter threatening to take to streets to protest against the arrest of its leaders, Ahmed added.

Muhammad Saeed Khalid, head of research at Shajar Capital, said, “Going forward in the next week, we expect the index to improve mainly at the start of 1QFY21 result season along with the expected improvement in the automobile numbers”.

Further, large-scale manufacturing data along with remittances numbers was likely to play an important role to further the recovery of benchmark index in the week ahead, Saeed Khalid added.

Foreign investors sold equities worth of $7.45 million compared to a net-sell of $8.25 million last week.

Major selling was witnessed in commercial banks ($2.48 million) and E&Ps ($2.15 million).

On the domestic front, banks/DFIs ($7.14 million) followed by insurance companies (6.63 million), were among the major buyers.

Umair Naseer from equity sales desk of BMA Capital Management said, “The KSE-100 index will continue its positive momentum on the back of stable interest rates, better participation, and improved foreign exchange reserves”.

“Having said that, we advise investors to remain cautious given the expectations of rise in COVID-19 cases and continued political turmoil,” Naseer added.

Yousuf Saeed, head of research at Darson Securities, said, “The positive trend is expected to continue as the quarterly results season starts next week, where companies are expected to post better earnings compared to last quarter and year-on-year basis”.

“However any political move and negative news during weekend both on local and international side may restrict the index movement,” Saeed added.

Contribution to the upside was led by cements (164 points), commercial banks (127 points), oil and gas exploration companies (94 points), oil and gas marketing companies (76 points), and textile composite (61 points).

Scrip-wise major gainers were HBL (86 points), OGDC (71 points), PSO (66 points), UBL (65 points), and LUCK (45 points).

Whereas, scrip-wise major losers were COLG (32 points), BAHL (31 points) KEL (21 points), NBP (15 points), and PAKT (13 points).