Stocks to stay green on diluting political noise

Stocks increased close to three percent in the outgoing week, with a flurry of buying spurred by local banks and individuals, with average daily volumes up 21 percent on hope of early vaccine arrivals, dealers said, expecting the market to stay positive in days ahead.

Pakistan Stock Exchange (PSX) benchmark KSE-100 shares index demonstrated positive momentum during the outgoing week, it increased by 2.96 percent or 1,270.16 points to close at 43,740 points level.

Muhammad Saeed Khalid, head of research at Shajar Capital said the balance of payment numbers along with the advance release numbers would likely improve activity in the index.

Whereas the expected rise in fertiliser off-take along with the financial results to be announced by the sugar industry would also likely improve sentiments in the respective sectors.

“We believe that the benchmark index will mark the 45,000 level in the week ahead, mainly on strong investors’ confidence,” Khalid added.

Umair Naseer from BMA Equity Sales Desk said, “Considering the global roll out of the Covid-19 vaccine, significant budget allocation for vaccine procurement locally, and improving construction sector numbers, we expect the market to remain upbeat in the coming week.”

However, it would take some time for the second wave of Covid-19 to clear up and vaccine dissemination to reach masses, Naseer added.

An analyst from Arif Habib Limited in their report said, “The index is expected to continue extending its bull run on the back of diluting political noise.”

Moreover, the approval of Moderna’s vaccine was expected any time soon, which was another leap forward in the battle against Covid-19. Also, healthy corporate earnings were expected during Q2FY21, which should continue fuelling positive sentiments, the analyst added.

During the week, immense investors’ participation was witnessed, average volumes arrived at 549 million shares (up 22 percent WoW), while average value traded settled at $154 million (up 25 percent WoW).

Foreign investors sold equities worth $9.4 million compared to a net sell of $9.6 million last week.

Selling was witnessed in commercial banks ($11 million) and fertiliser ($1.4 million).

On the domestic front, major buying was reported by banks / DFIs ($7.1 million and individuals ($5.1 million).

Robust activity in the benchmark index was mainly witnessed on the revival of the economic indicators in the country, along with the improved industrial and commercial confidence. LSMI surged by 5.46 percent during the last 4MFY21, where refinery, fertiliser and technology stocks remained the centre of investors’ confidence.

The medium-term market expectations remain positive, which was evident by investors’ interest and participation. Global equities also remained upbeat during the week, as investors continued to track developments on the vaccine front.

Although the post-Covid scenario was more apparent than ever before, the threat from the second wave was still very much real, with daily cases reaching as high as 700,000 worldwide and nearly 2,500 in the country.

Investors remain cautious about the end of this wave, and any subsequent rise in cases. The country’s total positive cases have started to decline from their high of 50,000 to 43,000, with the infection ratio above still above six percent.

Sector-wise positive contributions came from banks (342 points), fertilisers (231 points), and oil and gas exploration (202 points), while power generation and distribution declined (37 points). Scrip-wise positive contributions were led by Oil and Gas Development Company (112 points), Fauji Fertilizer Company (95 points), Meezan Bank (68 points), Engro (64 points), and Pakistan State Oil (63 points).

Hubco and Kohat Cement led the negative contributions, declining 43 and 15 points, respectively.