Stocks maintain bullish trend for third week

KARACHI: Bulls continued to rule at the stock market for the third week in a row with the benchmark KSE-100 index recording gains of 263 points or 0.6 per cent in the outgoing week. The index settled at 42,470 points level which was last witnessed in September.

The bullish momentum, however, remained shaky for the entire week as the growing hostilities between the opposition alliance and the government took ugly turns. Most individuals and institutions thought discretion to the better part of valour and put off fresh buying to the upcoming week.

The political noise was set to be at its loudest on the 13th when the opposition planned to hold a power show in Lahore. The threat of en masse resignations from the parliament also kept investors unnerved as they feared a constitutional crisis, regardless of the government putting up a bold face of holding bi-elections on the vacated seats. Although the breakout in coronavirus infection is a real threat going forward in the face of huge crowds throwing SOPs in the air.

Foreign selling continued during the outgoing week clocking-in at $9.6m compared to a net sale of equites worth $30.0m the earlier week. Outflow was witnessed in commercial banks of $9.9m and OMC $1.0m worth of stocks. Among local participants, insurance companies wiped out much of the liquidity by fresh buying of $10.6m and individuals made net purchases of $2.9m.

Average volume arrived at 452m shares (up by 3pc week-on-week) while average value traded settled at $123m (up by 9pc). Scrips that led the average daily volume included PRL (165.9m), TRG (162.4m), Unity (151.2m) and PIBTL (92.1m) shares.

Following the release of COVID-19 vaccines, international Brent oil prices jumped to its 9-month high to close above $50 per barrel. In other positive developments, Remittances jumped 20pc year-on-year for the sixth month, amounting to Rs2.34bn, with the highest- ever daily inflows in the Roshan Digital account of $7.7m.

Foreign exchange reserves swelled to $13.3bn, up by $188m during the week. Besides, the FBR registered 4pc YoY increase in number of income tax filings which stood at 1.8m; Pakistan hoping to secure $873m worth of debt servicing suspension from the Paris Club of creditor nations, total cement dispatches during Nov’20 recorded at 4.51mn tons, representing a rise of 4.19pc YoY.

Sector-wise positive contributions came from refineries, cement, engineering, technology & communications, oil & gas exploration companies and commercial banks. Scrip-wise positive contributions were led by HBL, UBL and OGDC. On the flipside, major sectoral loss was observed in tobacco while scrip wise negative contributions were led by MCB Bank and Systems Ltd.

Going forward, pundits thought that though nearing the September highs, the KSE-10 index still had room to rise. Uptick in international oil markets after the Covid vaccine arrived in the market, raising hopes of recovery in global economies, the underperforming oil & gas exploration and production stocks could keep market direction upwards. It could also be assisted by positive contributions from the banking sector.

Healthy offtake in automobiles, pharmaceuticals and cyclicals steel and cement was thought to leave positive impact on next quarterly results. The strong value of the rupee against the dollar could lend support to the export-oriented industries and cut down on cost of productions. Having said that political uncertainties in the face of growing noise and a breakout in coronavirus cases, have the potential to upset the apple cart.