Stock rally pushes November’s returns to 8pc


KARACHI: (Parliament Times) Underpinned by strong liquidity position of local investors, recovery in international oil prices and positive sentiments in cement and textile sectors, the benchmark KSE-100 index continued to travel north, gaining 675 points (or 1.6 per cent) to close the week at a handshake distance from the 43,000 level.

Return during the current month has worked out at 7.8pc compared to a negative return of 1.6pc reported in the preceding month. Dealers at BIPL Securities (formerly KASB Securities) believed that the rollover week kept the upward movement of the index in check, while oil provided main support amid selling pressure from foreigners.

There was no end to the selling spree by foreign investors who offloaded stocks worth $37 million during the week. Foreign selling remained concentrated mainly in banks, chemicals and cement sectors, amounting to $12m, $3m and $2.5m, respectively.

The foreign sell-off during the week raised the total portfolio outflow to a massive $92.8m during this month. But the flight of capital was not specific to Pakistan as most frontier and emerging economies are faced with similar situation amid strengthening of the US dollar.

However, ample liquidity available with local participants, particularly mutual funds and banks, at the Pakistan Stock Exchange continued to absorb the overseas investors’ selling pressure.

Average daily volumes for the week rose 4pc to 475m shares over the earlier week as large-cap stocks attracted investors, while average daily value increased 10pc to Rs15 billion. Second-tier scrips such as Pace Pakistan, Bank of Punjab, Pakistan International Airlines, Summit Bank and Azgard Nine led the volume leaders’ list.

According to analysts at Topline Securities, the top three gainers during the outgoing week were cements, oil exploration and production (E&P) companies, and food and personal care sectors, up 4.7pc, 3.7pc and 3.5pc, respectively. Top three losers were autos, banks and technology and communication declining 1.1pc, 0.9pc and 0.6pc, respectively.

“Major positive developments which triggered investor sentiments during the week included the proposed bailout package for export-oriented sectors, recovery in international oil prices and expected investment by China worth $8.5bn in infrastructural project in addition to the China-Pakistan Corridor,” dealers at Spectrum Securities said.

Other developments noted by JS Global included auction of direct-to-home (DTH) licences, which fetched Rs14.69bn, treasury bills auction that raised Rs290bn with unchanged cut-off yields, and release of balance of payment numbers (the country’s current account deficit rose 63pc year-on-year in the July-October period).

Calculations by Intermarket Securities showed major contribution to the index upside coming from the Oil and Gas Development Company (3.27pc), Pakistan Petroleum (3.96pc), Pakistan Oilfields (6.25pc), Nishat Mill Ltd (8.38pc) and Nestle Pakistan (5.42pc), adding 261 points to the KSE-100 index. In contrast, Habib Bank was down 1.89pc, Sui Southern Gas Company 6pc and MCB bank 0.63pc, collectively taking away 84 points.

OUTLOOK: Several market participants expect further recovery in international oil prices on the hope of cap on production at the Organisation of Petroleum Exporting Companies (Opec) meeting on Nov 29.

Dealers at Arif Habib Ltd believed the market could remain robust next week, fuelled by reduction of gas prices by 33pc for all industries. On the flip side, Panama Papers case hearing on Nov 29 may keep the market volatile.

The announcement of State Bank’s monetary policy, which kept the policy rate unchanged, could be taken as neutral event for the market. While foreign outflows may continue the quantum was hoped to be on the lower side.

BMA Capital forecast a possible minor correction as the index was trading at its all-time high. “However, direction of foreign flows will remain critical in determining the ultimate direction of the market,” most market pundits said.