Weekly review: KSE-100 gains 1.3% in jittery week

• After early troubles, the market remained in the green, thanks to a Saudi support package.
• Reduction in COVID-19 cases coupled positive expectations about ongoing negotiations with IMF fueled bullish sentiments.
• "We expect the market to show positivity in the upcoming week attributable to the conclusion of talks with the IMF," AHL predicts.

KARACHI: The Pakistan Stock Exchange (PSX) posted gains in the outgoing futures rollover week buoyed by the Saudi support package. The KSE-100 index rose by 606 points or 1.3% to settle at 46,184.71 in the week under review.

Reduction in COVID-19 cases, coupled with upbeat economic data and positive expectations about ongoing negotiations with the International Monetary Fund (IMF), fueled bullish sentiments at the bourse.

Technical issues with the newly-acquired Chinese trading system impacted the market and tempered gains, but the overall sentiment at the local bourse showed signs of improvement as investors remained undeterred by the political gloom.

The week started on a negative note as investors reacted poorly to uncertainty over the outcome of Pakistan’s talks with the IMF. The negativity continued as a continued depreciation in the rupee against the US dollar shattered investors' confidence as the currency reached an all-time low of Rs175.27 on Tuesday.

However, the trend reversed on Wednesday after the Saudi Fund for Development said it was depositing $3 billion in the State Bank of Pakistan (SBP) to help support foreign exchange reserves.

The market then maintained a positive momentum till the last session despite some technical glitches in the newly acquired Chinese trading system.

On Wednesday, the market halted trading from 12 noon to 2:30pm. Although operations resumed at 2:35pm, the system again became non-functional in the last 30 minutes (from 3:30-4pm) before the market’s closure.

Despite the chaos, investor participation revived at the bourse and widespread cherry-picking in several sectors triggered a rally. Thanks to the recent dip, share prices were at attractive valuations and motivated market participants to assume fresh positions.

Encouraging corporate results announced during the week and a correction in rupee-dollar parity tossed the benchmark KSE-100 index above the 46,000-point mark on the last session of the rollover week.

Other major developments during the week were: central bank’s forex reserves fell to $23.933 billion, Pakistan planned to issue dollar Sukuk in two months, circular debt reached Rs2.294 trillion in July-August, total foreign loans hit $3.2 billion in July-September, CDWP put Rs345.62 billion projects on the ECNEC table, the government said it would receive Rs60 billion gas development surcharge from private plants, Phase-III Thar coal mining expansion project was approved, NTDC said it would construct 765kv transmission line and IMF said it would allow Pakistan to utilise a $2.78 billion COVID support fund.

Foreign selling continued this week, clocking at $2.7 million against a net sell of $7.3 million recorded last week. Selling was witnessed in commercial banks ($2.5 million) and fertilisers ($1.7 million).

On the domestic front, major buying was reported by other organisations ($1.7 million) and insurance companies ($1.3 million).

During the week under review, average volumes clocked in at 203 million shares (down by 32% week-on-week), meanwhile average value traded settled at $40 million (down by 37% week-on-week).

Major gainers and losers of the week

According to a report by JS Global, sector-wise positive contributions came from engineering (+8.9%), cement (+7.6%), autos (+3%), oil and gas marketing companies (+1.5%), chemical (+1.4%) and power (+1.4%), whereas negative contributions came from refinery (-2.9%), exploration and production, and (-1%), banks (-0.8%).

Scrip-wise major gainers were Mughal Iron and Steel (+16.8%), Packages Limited (+14.6%), Shifa International Hospitals (+12.5%), Shakarganj Limited (+12.4%) and Pioneer Cement (+10.8%). On the flip side, major losers were Searle (-22%), Lotte Chemical (-8.3%) and Avanceon (-7.6%).

Outlook for next week

A report from Arif Habib Limited predicted: “We expect the market to show positivity in the upcoming week attributable to the conclusion of talks with the IMF for the sixth tranche.”

“Moreover, support from Saudi Arabia in terms of safe deposits, IMF tranche, and the upcoming Sukuk issue (expected to raise $1,000 million) alongside suspension of debt repayment will release the pressure off of the country’s foreign exchange reserves,” it said, adding, however, current macro-economic concerns like rising imports and higher CPI inflation could keep the market range-bound.

“The KSE-100 is currently trading at a PER of 5.3x (2021) compared to Asia-Pacific regional average of 14.6x while offering a dividend yield of 8.1% versus 2.2% offered by the region,” the brokerage house stated.