Stocks to take cue from IMF review, results

Stocks saw another roller-coaster week to end lower on economic concerns with world commodities, especially energy, prices shooting for the sky, but a successful IMF loan review, strong financial results, and improving Covid situation might turn the losing tide, dealers said.

Pakistan Stock Exchange’s KSE-100 Shares Index wrestled between a high and a low of 45,105 points and 44,284 points, respectively, to conclude at 44,477 points, down 394 points or 0.9 percent week-on-week.

“Going forward, we expect the market to show positivity in the upcoming week attributable to conclusion of talks with the IMF for the sixth tranche,” brokerage Arif Habib Ltd said in its weekly market review. Moreover, the brokerage said, decline in infection ratio of the novel coronavirus in Pakistan and slowdown in global oil prices would release pressure from external account.

However, current macro-economic concerns like rising imports, higher inflationary reading due to increasing petroleum prices and pressure on currency could keep the market range-bound, it added.

According to a report by brokerage BMA Capital, the market, once again, succumbed to concerns related to surging commodity prices, depreciating rupee, upcoming IMF talks, and foreign selling on account of MSCI reclassification to Frontier Markets (FM). Consequently, the average traded volumes continued to remain low at 265 million shares, down 25 percent week-on-week, whereas daily traded value also dropped to $60 million, down 21 percent week-on-week.

Brokerage AKD Securities said reeling from the previous week’s dejected performance, the index continued its negative trajectory across the week as skyrocketing commodity prices, rising inflation, and widening trade deficit played over sentiments.

In addition to this, the AKD Securities analysts said the market sentiment reflected concerns over the upcoming IMF review and political uncertainties. Cement sector was among the major laggards for the week, losing 5.6 percent week-on-week as coal prices continued to trade near 10-year high amid increased demand for power generation in developed economies, the AKD analysts said.

“Market direction is likely to be determined by upcoming result season, geopolitical situation and most important IMF review where formal talks are expected to take place in the next week,” analysts at AKD securities said.

“The government appears to be formulating strict measures to increase tax base.” Moreover, they said gas and electricity tariff hikes were on the cards as well.

Contribution to the downside was led by cements (268 points), fertiliser (110 points), oil & gas marketing companies (47 points), power generation and distribution (30 points), and engineering (25 points).

Scrip-wise major losers were LUCK (139 points), FFC (45 points), PPL (39 points), CHCC (38 points), and SNGP (34 points).

Whereas, scrip-wise major gainers were MARI (144 points), UBL (69 points), SEARL (41 points), MTL (27 points) and COLG (26 points).

Foreigners offloaded stocks worth $3.70 million compared to a net sell of $21.85 million last week.

Major selling was witnessed in commercial banks ($9.85 million), and fertilisers ($4.33 million).

On the local front, buying was reported by Individuals ($7.13 million) followed by mutual funds ($3.61 million).

During the outgoing week, inflation was reported to have risen to 9 percent in September, trade deficit widened over 100 percent to $11.66 billion in June-September, cement sales dipped almost 6 percent in July-September, State Bank of Pakistan announced new steps to curb dollar outflows, IMF demanded raise in income tax, sales tax, regulatory duty, and rupee recovered as central bank curbed certain outflows.