Stocks seen upbeat on macroeconomic indicators

Stocks moved in a narrow bank during the outgoing week as investors remained aloof looking at rising political noise amid resignations in opposition ranks and rapidly rising Covid-19 cases in the country, dealers said.

However, it would expectedly change course in the upcoming week owing to suppressed food inflation and improving economic indicators.

Pakistan Stock Exchange's KSE-100 index was up by merely one percent or 263 points during the outgoing week to conclude at 42,470 points week-on-week (WoW). The KSE-100 index largely moved between the narrow range of 42,000 to 42,628 level.

Salman Ahmad, head of institutional investment at Aba Ali Habib said, “Owing to cautious investor sentiment, the market moved in narrow banks due to increasing friction between the federal government and 11-party opposition alliance.”

International crude oil prices continued to rise to almost pre-covid levels, where Arab Light closed at $49.25/bbl up 4.3 percent. Auto assemblers remained muted despite posting growth of 40 percent in November 2020 compared to the same period last year, Ahmad added.

Muhammad Saeed Khalid, head of research at Shajar Capital said the index would also likely perform on the suppressed SPI numbers for the outgoing week.

“We also believe that the textile and food sectors may likely perform during the week ahead mainly on the announcement of advance trade numbers,” Khalid added.

Ansreen Malik from BMA Equity Sales Desk said, “We expect the market to remain upbeat considering the improving macroeconomic indicators and strong value of rupee against the greenback.”

However, he advised investors to stay cautious amid surging virus cases and slight political noise. “Accumulating positions on dips will be the best strategy moving forward,” Malik added. Analyst from Arif Habib Limited in their report said, “Recovery in international commodities (such as oil) and enticing valuations is expected to keep banking and E&P scrips in limelight.”

Revival in economic growth, healthy off-take, stable pricing power, and low borrowing rates should translate into robust earnings jump in cyclicals (cement, steel and automobile), he said.

“We advise market participants to invest in long-term blue chip scrips”, the analyst added.

During the week, volumes clocked in at 452 million shares, up by three percent compared to preceding week’s turnover. The average value also increased to $123 million up by nine percent, on week-on-week basis.

Foreign investors sold equities worth $9.6 million compared to a net sell of $30.0 million last week.

Selling was witnessed in commercial banks ($9.9 million) and oil marketing companies ($1 million).

On the domestic front, major buying was reported by insurance companies ($10.6 million and individuals ($2.9 million).

Confidence remained muted as the second wave of Covid-19 is in full effect with far more severe impact. Active cases in the country have spiked up to 44,580 with daily reported cases averaging above 3,000. Seven-day moving average of infection ratio crossed 8.1 percent (144 day high).

Sector-wise positive contributions came from cement (51 points), oil and gas exploration companies (50 points), and commercial banks (50 points).

Scrip-wise positive contributions were led by Habib Bank Limited (49 points), United Bank Limited (38 points), and Oil and Gas Development Company (31 points).

On the flipside, major sectoral loss was observed in tobacco (13 points), while scrip wise negative contributions were led by MCB (45 points) and Systems Limited (22 points).