Stocks manage gains in short week

KARACHI: The outgoing shortened week (with three sessions instead of the usual five) was marked by early week selling as panic-stricken investors watched the Taliban advance without resistance and capture Afghanistan’s capital Kabul. However, by the end of the week, the KSE-100 index gained 430 points, or 0.91 per cent, and closed at 47,600.

Heavy sell-off in the first two sessions saw the index sink like a stone to 46,672 points, piercing through the 47,000 resistance. But during the two day Moharram holidays, the murky waters in Afghanistan started to clear. Contrary to the general expectations, the Taliban avoided bloodshed and made reconciliatory gestures in and outside the country. There were even some signs of restoration of trade ties as customs duties were lifted from over 100 items that fuelled rally in the cement and steel sectors on Friday.

Moreover, the peaceful political situation in the country and the decline in international commodity prices helped to build sentiments. The sore point continued to be uncertainty over Covid where the infection cases and deaths did not recede.

On the positive side, the Asia Pacific group improved Pakistan’s rating on four more recommendations of the FATF programme, making the country largely compliant with 35 out of 40 recommendations, the Roshan Digital Account inflows amounted to $2bn in first 11 months of its inception and LSM grew by 14.85pc in FY21, all of which improved investors’ mood. Moreover, IMF inflows of 2.8bn is thought to lift SBP reserves to $19.5bn, which would be its new all-time high.

Foreign investors offloaded stocks worth of $10.82m during the week compared to net purchases of $3.95m the earlier week. Biggest outflow was noted from cements amounting to $2.53m.

Going forward, pundits expect market to maintain the upward trajectory as things start to look a bit cheerful. On the political side, the victors in the Afghanistan does not seem to have created problems for Pakistan and even moved to implement steps to improve trade ties.

The rally in the cement shares on Friday was on hopes of huge exports to Afghanistan as a reconstruction phase begins. Internally, the PTI government has completed three years and is making promises for the future with the opposition and its supporters disillusioned and fragmented. The major worry on the investors mind will continue to be the Covid situation. The infection ratio 7 day moving average has declined by 10pc to 7.1pc. However daily readings do not depict a major slide in number of cases or the death rate.