Stocks rally on investor optimism

Strong corporate results, rupee appreciation aid uptrend

KARACHI:

The outgoing week sparked optimism among investors at the Pakistan Stock Exchange, which fuelled a rally, driven by the much-awaited revival of International Monetary Fund’s (IMF) $6 billion loan programme coupled with robust corporate results.

Strong investor interest, stemming from a host of positive developments, helped sustain a buying spree and lifted the stock market by 832 points, or 1.85%, to close the week at 45,910. “Positive momentum was mainly driven by investors’ anticipation of approval of $1 billion disbursement by the IMF executive board under the Extended Fund Facility (EFF),” stated a report of Arif Habib Limited.

“Bullish momentum accelerated owing to investor optimism about the forthcoming corporate results.”

Bulls held their firm grip over the bourse since the beginning of the week and added 1,041 points to the benchmark KSE-100 index in the first three days primarily because of expectation that the IMF would give its green light for the resumption of Pakistan’s loan programme, which had been on hold since mid-2021.

In addition, news reports that Pakistan would seek a $3 billion loan from China during the prime minister’s visit supported the market’s uptrend. Market players voiced hope that the loan would bolster the weakening rupee and foreign exchange reserves of the country.

A bullish spell in the international stock markets, arising from the improvement in global economic cues, helped Pakistan’s bourse sustain the upward march and encouraged investors to take fresh positions.

The buying spree received a major boost from reports that Pakistan had raised $1 billion by floating Sukuk.

Despite the IMF’s go-ahead for restoring the loan programme, the bourse turned bearish on Thursday primarily on the back of a sharp rise in inflation.

The Consumer Price Index (CPI) for January came in at 13%, which raised fears of a further increase in inflationary pressures, denting investor spirits.

The final session of the week saw the KSE-100 index inch up amid thin trading as investor participation stood low and activity remained muted.

Appreciation of the rupee against the US dollar throughout the week lent support to the market’s uptrend.

“A number of positive announcements are expected as an outcome of prime minister’s visit to Beijing, which is likely to fuel developments in textile, information technology and engineering sectors, which will keep sentiment upbeat at the bourse,” stated the AHL report.

During the week under review, average daily traded volume spiked 54% week-on-week to 289 million shares while average daily traded value climbed 43% week-on-week to $55 million.

In terms of sectors, positive contribution came from commercial banks (189 points), fertiliser (132 points), oil and gas exploration companies (127 points), oil and gas marketing companies (92 points) and textile composite (69 points).

On the flip side, sectors which contributed negatively were technology and communication (26 points), power generation and distribution (5 points) and automobile assemblers (4 points).

Stock-wise positive contributors were HBL (60 points), Fauji Fertiliser Company (52 points), Bank AL Habib (51 points), Oil and Gas Development Company (51 points) and PSO (50 points).

Meanwhile, scrip-wise negative contribution came from TRG Pakistan (18 points), Systems Limited (17 points) and Hubco (12 points).

Foreign selling continued during the week, which came in at $4.42 million compared with net selling of $4 million in the previous week.

Major selling was witnessed in technology companies ($2 million) and commercial banks ($1.7 million). On the domestic front, buying was reported by other organisations ($3.9 million), followed by mutual funds ($3 million).

Other major news of the week included arrival of Prime Minister Imran Khan in Beijing, prices of petroleum products remaining unchanged, Economic Affairs Division’s clarification about reports of $5 billion in new loans being sought by Pakistan, IMF forecasting 4% real GDP growth and Drug Regulatory Authority agreeing to raise prices of Paracetamol to end shortage.

Published in The Express Tribune, February 6^th, 2022.

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