Stocks seen advancing on earnings strength

Stocks are likely to rally next week betting on better earnings, a global commodity rout, and easing regional security concerns, traders said.

Week-on-week, KSE-100 Shares Index closed 430 points or 0.91 percent higher at 47,600 points.

“We expect the market to remain positive in the upcoming week attributable to crashing global commodity prices and the ongoing result season, which will keep specific companies under the limelight,” said a report by Arif Habib Limited, a brokerage house.

On the other hand, the report said a decline in Covid infection ratio in Pakistan and a slowdown in global oil prices would reduce pressure on the external account.

The market mostly remained in the negative territory amid geopolitical uncertainty given the crisis in Afghanistan and its potential spillover in Pakistan, closure of borders that connect trade activity with Afghanistan, and fewer trading days in the week owing to religious holidays.

However, trading activity picked up pace on the back of peaceful takeover of Kabul by Taliban, decline in international commodity prices, reopening of borders with Afghanistan.

Average daily volumes and traded value for the outgoing week were down 13 percent and 4 percent to 266 million shares and $70 million, respectively.

Foreigners offloaded stocks worth $10.82 million compared to a net buy of $3.95 million last week.

Major selling was witnessed in all other sectors ($10.79 million) and cements ($2.53 million). On the local front, buying was reported by companies ($7.78 million) followed by mutual funds ($5.87 million).

Contribution to the upside was led by cements (151 points), commercial banks (86 points), power generation and distribution companies (72 points), oil and gas marketing companies (65 points), and fertilisers (41 points).

Scrip-wise major gainers were MEBL (73 points), HUBC (62 points), PSO (57 points), DGKC (40 points), and MLCF (36 points).

Major laggards included PPL (-18 points), KTML (-16 points), NESTLE (-11 points), PSEL (-11 points) and MARI (-10 points).

During the week Roshan Digital Account inflows reached $2 billion in 11 months, LSM growth surged 14.85 percent in FY21, Pakistan bonds were hit on Afghanistan scares, and foreign direct investment plunged 38.7 percent in July.

Economic Coordination Committee of the Cabinet approved the continuation of electricity (US cents 9 per kWh all-inclusive) and gas ($6.5/MMBtu all-inclusive) subsidy for export-oriented sectors to reduce the cost of manufacturing and support the momentum of growth in exports in FY22.

Current account deficit for July 2021 clocked in at $773 million against $1,619 million in June 2021.

Ateeq-ur-Rehman, an economic and financial analyst, said the pressure on import bill and stress on foreign exchange led to the widening of current account deficit. In the past current account was in surplus due to historic remittances by non-resident Pakistanis, he added.

Rehman further said borrowing external debt to build up reserves was not a good step.

“For example if we need to refund

$9 billion and have had borrowed $15 billion, the additional borrowing is always high-cost, which is not advisable,” he added.