Stocks to stay wary of economic, political risks

Shahid Shah
Sunday, Oct 02, 2022

KARACHI: Stocks may tread water until more clarity on economic front, while Imran Khan’s arrest warrants are widely seen as a blow to sentiment and with the results season nearly gone, traders don’t see any earnings-driven triggers down the line, they said.

The KSE-100 Shares Index closed the week at 41,129 points, up 508 points or 1.25 percent week-on-week, while average volumes clocked in at 200 million shares, up 20 percent and the average traded value increased to $36 million, up 39 percent week-on-week.

Brokerage Arif Habid Ltd said the week commenced on a positive note as the market jumped 531.1 points on Monday, while they also closed higher on the last day of week cheering a decline in Sensitive Price Index (SPI) inflation numbers (down 8.8 percent down week-on-week).

“With the results season almost over, we expect the market to remain range-bound next week,” the Arif Habib Ltd weekly market report said.

Moreover, the market also reacted positively to the news of the change in Finance Ministry high-ups.

Furthermore, rupee appreciated against the greenback, closing at 228.45, up by Rs11 or 4.9 percent week-on-week. Further, an amount of around $2 billion was committed by ADB which, it is expected to mobilise by the end of this year. On the flipside, the market sentiment become negative towards the end of the week as the SBP reserves declined by 4 percent week-on-week to $8 billion.

In addition, yields on Government of Pakistan’s international bonds, maturing in 2022 and 2024, increased during the week by 20-24 percentage points week-on-week.

Moreover, with HBL coming under international scrutiny, market sentiment was further dented.

Foreign selling during this week was recorded at $0.15 million compared to a net buying of $5.09 million last week.

Major buying was witnessed in technology ($2.5 million), cement ($0.2 million), power generation & distribution ($0.2 million), and food & personal care products ($0.1 million).

On the local front, mutual funds sold equities worth $7.6 million, followed by insurance companies that shed $3.9million equities.

Supporting sectors turned out to be power generation & distribution (141 points), cement (107points), technology & communication (92 points), oil & gas exploration (65 points) and fertiliser (40 points). Stocks that underpinned the index were HUBC (139 points), TRG (122 points), PPL (55 points), LUCK (49points), and OGDC (40 points).

Among the major laggard sectors were commercial banks (217 points), and close-end mutual funds (1 point). Names that added to the losses included HBL (213 points), MEBL (34 points), MARI (32 points), SYS (28 points), and BAHL (12 points).

A KASB Research Report said the benchmark index gained almost 509pts during the week as investors' confidence improved amidst currency appreciation of 4.6 percent. Hence, volumes improved by 21 percent week-on-week, it added.

“Ishaq Dar, the new finance minister, believes that the currency is currently overvalued and bringing inflation and interest rate down would be the top priority,” the KASB report said.

“Currency strengthened by almost 5 percent during the week and investors accumulated positions in cyclical stocks, particularly cements and steel.”

Notably, HBL stock hit two lower circuits in the last two trading sessions as the bank is facing allegations in a US court.

“With the ongoing challenges after floods, the government is trying to renegotiate the terms and conditions with the IMF.”

“During these testing times, we recommend defensive sectors including fertiliser and power. Moreover, cyclicals may perform with the strengthening of the currency,” the KASB report added.