Stocks likely to pick up on economic strength

Stocks are primed to pick up next week trusting the current account to post surplus for the first half, the government to announce textile policy, and companies to declare liberal earnings, dealers said.

The January effect has been in full swing as 2021 has so far been positive for the local markets, wherein the KSE index has only went one way, up from 44,435 points on 1st January.

Week-on-Week, Pakistan Stock Exchange's (PSX) KSE-100 shares index gained 0.6 percent or 276.66 points to close at 45,931 points.

The last day of the week saw the index pull back from its week high of 46,316 points but still managed to improve on week-on-week basis.

Muhammad Saeed Khalid, head of research at Shajar Capital, said, “We believe the index to remain above the psychological level of 46,000 mainly on the likely announcement of textile policy along with the detailed trade numbers”.

The banking sector might remain sluggish on the expected announcement of Monetary Policy later this month, he said.

“We also believe if current account posts surplus for the 1HFY21, it will improve sentiments in textile, power, and IT industries,” Khalid added.

Salman Ahmad, head of institutional sales at Aba Ali Habib Securities, earnings optimism motivated the market participants to push the index higher, despite offloading by foreign investors.

The major reasons for choppy trading activity during the week were ECC’s dragging its feet on approval of Textile Policy and ambiguity on government-IPP agreement on circular debt payments, he said.

On the domestic political front, situation remained calm comparatively, while Quetta protestors also ended their nationwide sit-in on government’s assurance for justice, Ahmad added.

Umair Naseer at Equity Sales Desk at BMA Capital Management said, “We anticipate the market to sustain its positive momentum given the fast pace of global vaccine rollout, stable value of rupee against the greenback and improving macroeconomic indicators”.

“We believe banks, E&Ps, fertilisers, autos, and cements will lead the index performance this year. Our strategy report released this month further highlights our top stock picks and ongoing year outlook,” Naseer added.

Tahir Abbas, director research at Arif Habib Limited, said, “We expect the market to remain positive on the back of healthy earnings expectations, which will drive the index”.

Moreover, ongoing roll out of vaccines across the globe will most likely keep equity markets buoyant, Abbas added.

During the week, average volumes clocked in at 682 million shares (up 9 percent week-on-week). Whereas, average value traded settled at $129 million (down by 16 percent week-on-week).

Foreign investors sold equities worth $2.1 million compared to a net buy of $3.4 million last week. Major selling was witnessed in cements ($0.9 million) and FMCG ($0.8 million).

On the local front, major buying was reported by individuals ($24 million) and banks/DFIs ($1.2 million).

Sector-wise positive contributions came from technology & communication (168 points), power generation & distribution (66 points), engineering (41 points), glass & ceramic (37 points), and textile composite (34 points).

Whereas, sectors that contributed negative include fertiliser (63 points), tobacco (30 points) and oil & gas exploration companies (27 points). Scrip-wise positive contributions were led by SYS (89 points), TRG (82 points), INIL (42 points), KAPCO (42 points), and GHGL (37 points).