Weekly review: KSE-100 ignores noise on MSCI downgrade

• The benchmark KSE-100 index closed the week at 47,198.28, up 241 points.
• The increase comes on the back of positive economic cues and clarity regarding MSCI.
• The index finished two of the five sessions in green.

KARACHI: Bulls staged a comeback at the Pakistan Stock Exchange (PSX) following a week of bearish trade as the benchmark KSE-100 index once again powered past the 47,000-point mark. The index posted gains of 241 points or 0.5% in the outgoing week to settle at 47,198.28 points.

Trading was volatile throughout the week with the index finishing two of the five sessions in the green.

JS Global analyst Muhammad Waqas Ghani said: “The market participants remained cautious during the first three trading days over a rising import bill, rupee-dollar parity and lack of clarity on the macro-economic front.”

The week began on a negative note as the investors remained jittery over a possible reclassification of the PSX at the Morgan Stanley Capital International (MSCI) index.

Moreover, the cement sector witnessed aggressive selling on Tuesday owing to higher coal prices after which the sector closed in the red.

The MSCI verdict — according to which the international company reclassified the MSCI Pakistan Indexes from Emerging Markets to Frontier Markets in one step, coinciding with the November 2021 Semi-Annual Index Review (SAIR) — coupled with surging coronavirus cases, took a toll on the market sentiment as investors resorted to profit-booking.

However, the tables turned as the market moved up Thursday after the downward adjustment in the wake of the MSCI reclassification.

The upbeat remittances data — which stayed over $2 billion for the 15th consecutive month — and a host of financial results added fuel to the bullish momentum.

Moreover, Octopus Digital — a subsidiary of Avanceon Limited — received huge interest from investors, as it oversubscribed by 27 times — the highest since book building was introduced at the stock market — during the two-day book-building process at the PSX on Friday, which gave a boost to the technology sector.

Foreign selling continued this week, settling at $18.6 million against a net sell of $5.9 million recorded last week. Selling was witnessed in commercial banks ($10.9 million), cement ($6.1 million) and exploration and production ($0.9 million).

On the domestic front, major buying was reported by individuals ($12.9 million) and insurance companies ($6.2 million).

During the week under review, average volumes clocked in at 429 million shares (down by 7% week-on-week), meanwhile average value traded settled at $87 million (up by 5% week-on-week).

Major contributors

Sectors that contributed positively during the week included technology and communication (+214 points), miscellaneous (+168 points), commercial banks (+148 points), pharmaceuticals (+59 points), and food and personal care products (-14 points). On the flip side, sectors that contributed negatively were cement (-155 points), oil and exploration companies (-56 points) and fertiliser (-34 points).

Scrip-wise major gainers were Pakistan Services (+164 points), Meezan Bank (+147 points), Systems Limited (+115 points), TRG Pakistan (+99 points) and Nestle Pakistan (+39 points). Meanwhile, scrip-wise major losers were Lucky Cement (-103 points), HBL (-57 points) and Engro Corporation (-51 points).

Forecast for next week

A report from Arif Habib Limited noted that the market may show range-bound behaviour next week. “Keeping in view the concerns over inflation, devaluation of Pakistani rupee against the greenback and current account deficit, investors are expected to have a cautious approach,” it said.

The report added: “With the ongoing result season, certain sectors and scrips are expected to stay under the limelight.”

The brokerage house stated: “Our preferred stocks are Hi-Tech Lubricants, Engro Polymer and Chemicals, Pakistan State Oil, Oil and Gas Development Company, The Hub Power Company, HBL, Fauji Fertiliser Company, Lucky Cement, Attock Cement, Engro Corporation, UBL, Sui Northern Gas Pipelines and Nishat Mills.”

“The benchmark KSE-100 is currently trading at a PER of 5.8x (2021) compared to Asia-Pacific regional average of 14.5x while offering a dividend yield of 7.8% versus 2.2% offered by the region.