Stocks seen strong; rollover week may weigh

Stocks found fresh gains in week as some corporate earnings fared far better than expected, but FATF angst weighed on trade in the latter half; however trend is seen mostly positive, but political, economic, and pandemic-related risks remain, dealers said.

Pakistan Stock Exchange's KSE-100 shares index closed 2.73 percent or 1,102 points higher in the outgoing week and closed at 41,266 points week-on-week (WoW). During the week, the benchmark index touched a peak of 41,818 points and a low of 40,078 points. Average volumes settled at 466 million shares, up by 57 percent WoW, while average traded value clocked in at $98 million, up 59 percent WoW.

Brokerage Arif Habib Limited in a market research note said, “Strong profitability trend of the index is likely to continue attracting bullish sentiment”.

Political noise was growing weaker as well, but concerns on the inflationary readings might provide some resistance, the report said.

“We also highlight conclusion of the FATF plenary meeting whereby Pakistan has maintained status quo (grey list); however, efforts undertaken by the government to counter money laundering were applauded,” the brokerage added.

Salman Ahmad, head of institutional sales at Abba Ali Habib Securities, said, “The earnings optimism pushed the index higher, despite foreign selling”.

Moreover, current account posted another surplus in September, which closed to $792 million during the first quarter of this fiscal year, highest in 17 years, he said.

“On the political front, rift between opposition and government continued into another week as Pakistan Democratic Movement prepares to hold a protest rally in Quetta on October 25,” Ahmed added.

With the US election drawing near, international markets saw a mixed week, while crude oil prices remained volatile owing to uncertain demand outlook.

The FATF plenary granted Pakistan a grace period of four months in February 2020 to complete its 27-point action plan against money-laundering and terror financing.

National Command and Operation Centre (NCOC) has warned of a likely re-imposition of COVID-19 lockdown as the active cases have surged by over 9,000 this week.

Furthermore, on account of upcoming rollover week, trading remained volatile as investors decided to book capital gains and stayed on the sidelines. As of October 22, 2020, the outstanding futures value was recorded at Rs 12.68 billion.

Foreign investors sold equities worth $6.9 million compared to a net selling of $2.7 million last week. Selling was witnessed in cements ($4.3 million) and fertilisers ($2 million).

On the domestic front, major buying was reported by mutual funds ($7.6 million) and companies ($4.8 million).

Ansreen Malik from BMA Capital Management Equity Desk, said, “We expect the FATF decision and the ongoing result season to drive the market sentiment”.

She said in addition to this, further appreciation of rupee might keep the market sentiment on a positive note. “On the other hand, there is a possibility that the upcoming rollover week might create pressure in the market,” Malik added.

Sector-wise positive contributions came from commercial banks (240 points), fertiliser (230 points), cement (226 points), automobile assemblers (73 points), and technology & communication (64 points).

Scrip-wise positive contributions were led by ENGRO (136 points), BAHL (133 points), EFERT (61 points), LUCK (60 points), and MEBL (57 points).