Stocks likely to step up on result strength

Stocks are seen rallying down the line, supported by strong corporate earnings announcements, after retreating for most of the week in tandem with international markets, dealers said.

The benchmark KSE-100 shares index shed 1,097.43 points or 2.34 percent for the week ended February 12, 2019 to close at 45,808.36 points. KSE-30 shares index lost 471.49 points or 2.4 percent to end the week at 19,104.50 points.

Ahmed Lakhani at JS Global Capital said the market finally underwent a much-awaited correction.

“Corporate results continued to pour in during the week, which despite being on the positive side in general, failed to move the index towards the green zone,” Lakhani added.

An analyst at Arif Habib Limited said the market started on a negative note as investors resorted to profit taking.

Despite the finalisation of an agreement between IPPs (Independent Power Producers) and the government, sentiment in power sector was mostly lackluster, the analyst added.

Crude oil prices crossing $60/bbl during mid-week sparked some interest in the E&P (exploration and production) sector, but it was short-lived as a weekend correction kept most of the participants out of energy stocks.

This week the market witnessed its highest ever single day volume of 1.125 billion shares.

Average daily volumes during the week surged 32 percent to 434 million shares, while the average value of traded securities clocked in at $169 million, down 1.5 percent as most traded were in penny stocks.

On the political front, while the fog remains on the mode of voting in the senate elections (show of hands or secret ballot), at least the Election Commission of Pakistan (ECP) announced the voting was scheduled for March 3, 2021.

Foreign selling during week clocked in at $3.2 million compared to a net sell of $2.7 million last week. Commercial banks witnessed an outflow of $4.3 million and E&P witnessed net selling of $0.4 million. On the domestic front, individuals and companies invested $12.7 $8.4 million in the equities, respectively.

Top performing sectors during the week were cement, gaining 5.2 percent, and refineries up 4.6 percent, whereas Oil Marketing Companies (OMCs) declined

7.3 percent, fertilisers 3.7 percent, and banks closed 3.9 percent down during the outgoing week.

During the week, the government agreed to pay power plants Rs161 billion out of a total Rs403 billion debt; trade deficit for January 2021 clocked in at $2.6 billion, up 21 percent on yearly basis; banks’ deposits for the month of January increased 16.4 percent; cement prices in the northern region increased

Rs5-10/bag, Cabinet allowed Mari Petroleum to remove cap on dividend; oil and gas production during the outgoing week was down 1.0 percent each; while no change was seen in the MSCI quarterly index review.

“We expect the market to turn positive in the coming week given healthy earnings expectations in the ongoing result season. We also highlight that the rupee has appreciated against the dollar to Rs158.82 in the outgoing week,” Arif a report by Arif Habib Limited report.

The KSE-100 index is currently trading at a PER of 7.4x (2021) compared to Asia Pac regional average of 17.7x, while offering a discount of 6.5 percent as compared to 2.5 percent offered by the region.