Earnings to drive stocks in bumpy trade

Stocks are expected to rise from the ashes of last week’s burnout as investors are seen placing faith in corporations to declare openhanded earnings in the coming days, dealers said.

The benchmark KSE-100 shares index gained 0.91 percent or 419.29 points for the week ended February 19, 2019 to close at 46,227.65 points. KSE-30 shares index gained 0.66 percent or 126.14 points to end the week at 19,230.64 points.

“The index performed mainly on the positivity on the economic and large-scale manufacturing side where we have noticed significant rise in textile and food exports, surging 8.0 percent and 2.5 percent, respectively in 7MFY21, compared to 7MFY20,” said Muhammad Saeed Khalid, head of Research at Shajar Capital.

He said despite renewal of IMF package, power sector remained in the negativity mainly on the IMF’s condition to review the circular debt agreement as per its conditions

“This along with the under-expected HBL results for the year CY20, plunged the index on 17th February by 580 points,” Khalid said.

Ahmed Lakhani at JS Global Capital said although activity was 19 percent lower this week with daily volumes averaging 595 million shares a day, they were still well above YTD FY21 daily average of 486 million shares a day. Similarly, average value of traded equities/day declined 6 percent to $159 million, he added.

Lakhani said news about Roshan Digital Account (RDA) inflows along with the 24 percent rise in remittances improved activity in the construction and tech stocks during the outgoing week.

Brokerage Arif Habib Limited in a report remarked that E&P sector briefly came under the limelight owing to a surge in the international oil prices (Arab Light reaching $64.16/bbl on Thursday).

A jump in remittances and Prime Minister’s rejection of Oil & Gas Regulatory Authority’s recommendation for hiking petroleum prices kept the sentiment positive; however, investors resorted to profit-taking, the report said.

Reports on resumption of the IMF program finally surfaced over the weekend, confirming that the IMF team had reached a staff level agreement. However, news flows of tougher conditions associated with an IMF program, particularly removal of income tax exemptions for corporate sector amounting to Rs150-200 billion dampened sentiment.

During the week, TRG Pakistan surged 17 percent, Netsol Technologies 20 percent, Telecard Limited 48 percent, Lucky Cement 5.0 percent, and Maple Leaf Cement recorded a 4.0 percent rise compared to previous week.

Foreign selling clocked in at $0.6 million compared to a net-sell of $3.2 million last week. Selling was witnessed in commercial banks ($5.1 million) and technology and communication ($1.4 million). On the domestic front, major buying was reported by companies ($5.5 million) and individuals ($4.9 million).

During the outgoing week, textile exports for January were reported to have declined 5.54 percent on sequential basis, Pakistan signed $2.203 billion new loan agreements, and data showed large-scale manufacturing surged 8.16 percent in 1HFY21.

Analysts expect the market to remain positive in the upcoming week given the continuation of result season, where healthy earnings are anticipated.

Furthermore, FATF’s review of Pakistan’s progress on the Action Plan (meetings between 22 to 25 February) will be a key event for the market. A decision to remove Pakistan from the grey list will likely be received very well by market participants. Moreover, with the inflow of remittances from abroad, rupee is expected to remain stable.