Stocks look strong amid robust results bets

Stocks are looking to carry gains into next week as the upcoming corporate results, especially those from banking sector, are likely to boost sentiment, amid hopes that virus vaccinations will soon unlock economic activities, dealers said.

Week-on-week, Pakistan Stock Exchange's (PSX) KSE-100 shares index gained 2.7 percent or 1,219 points to close at 45,654 points.

Muhammad Saeed Khalid, head of research at Shajar Capital said, “Considering the improving economic outlook and sooner-than-expected vaccine rollouts, we expect the market will continue its upward trajectory going forward as well”.

“Banks, E&Ps, fertilisers, automobiles, and cements continue to remain our top picks,” Khalid said.

Tahir Abbas director research at Arif Habib Ltd, said, “We expect the bull-run in the market to continue where developments on the vaccine front and its gradual distribution across the world is likely to keep interest in equities afloat”.

Expectations of healthy corporate profitability during the outgoing quarter, particularly across cyclical sectors, should keep sentiment positive, Abbas added.

The KSE-100 index is currently trading at a PER of 7.7x (2021) compared to Asia Pacific regional average of 18.0x and is offering a dividend of 6 percent versus 2.5 percent offered by the region.

Umair Naseer from the Equity Sales Desk at BMA Capital Managements said, “We believe that the index will likely resist above the 45,000 points level, primarily owing to the expected announcement of corporate results along with the automobile industry sales volume data”.

The index might continue bullish momentum on expected rise in profitability of banking, cements, automobile, steels, and textile industry stocks, he said.

“We believe this will likely help the index cross 46,000 points level in the week ahead,” Nasser added.

Political unrest pertaining to protests in Quetta and different cities following the attack on coalminers raised some concerns among investors.

However, the government’s announcement of the new textile policy laden with cash subsidies and other incentives for exporters; and the news of the removal of additional customs duty on 152 tariff lines buoyed the investors and triggered performance in the textile sector.

The negotiations for a settlement between the government and IPPs (Independent Power Producers) to resolve circular debt issues along with encouraging cement sales, up 12 percent, and oil sales rising 16, for December 2020 fueled investor sentiments.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, said overall investor sentiment was positive with major activity taking place in the refinery sector, with support of international oil prices, and the commercial banking sector.

“We expect the bullish trend to prevail with upcoming annual reporting,” Ahmad added.

During the week, investor participation rose by 15 percent with average volumes clocking-in at 608 million shares, while the average traded value also increased by 8 percent to reach $153 million.

Foreign investors sold equities worth $3.4 million compared to a net sell of $46.22 million last week. Major buying was witnessed in commercial Banks ($3.64 million) and technology ($2 million).

On the local front, major selling was reported by insurance companies ($8.1 million and banks/DFIs ($8.1 million).

Sector-wise positive contributions came from banks (561 points), fertilisers (224 points), oil & gas exploration (153 points), power generation & distribution declined (66 points), and chemicals (47 points). Scrip-wise positive contributions were led by UBL (154 points), HBL (117 points), MEBL (90 points), DAWH (88 points), and MCB (80 points).