KARACHI: Stocks were on fire in the outgoing week which saw the benchmark KSE-100 index galvanise above the 42,000 level with an astounding gains of 2,241 points (5.62 per cent) over the earlier week to close at 42,088 points.

“This is the highest points increase on a weekly basis,” said a relieved stockholder, who believed that the nightmare of index sinking below the 12-month low of 40,000, may now be over.

The floor under the prolonged steep fall was provided by a sudden surge of investor enthusiasm after the last week-end meeting of the stockbrokers, fund managers and other stakeholders with the prime minister.

Alongside modifications in taxation regime, the participants demanded setting up of a Rs20 billion support fund by the government through the NIT to bail out the market.

“Moreover, attractive valuations across the market as well as higher international crude oil prices attracted investor attention,” stated AHL Research, who added that the investors were also kept aside the political noise generated as a result of indictment of Nawaz Sharif, his daughter and the son-in-law.

Analysts at Topline Securities noted that the participation was upbeat as reported progress on the stock market relief package and easing concerns over macro-economic variables sparked investors’ confidence. Foreign exchange reserves and the current account numbers released during the week came better than market expectations.

Investors’ sentiment was further fuelled by strong corporate results of select companies.

Activity was seen in index-heavy blue-chips. The average volume during the week was up by robust 27pc while the traded value surged 48pc.

Sector-wise, major contribution to the market upside was seen in cements (477 points), oil & gas exploration companies (338 points), fertilisers (315 points), commercial banks (252 points) and oil & gas marketing (209 points).

Top gainers during the week identified by several brokerage houses included Lucky Cement, Engro Corp, PPL, DGKC and OGDC, cumulatively adding around 700 points. The week’s laggards were PAKT down 38 points and Kapco 14 points.

Foreign investors generally remained unimpressed and took the opportunity to book profit at higher prices. Against net purchases of stock worth $38.5 the earlier week, outflow during the outgoing week amounted to $7.36m with overseas investors’ selling concentrated in OMCs and oil & gas.

On the local front, banks/DFIs were the major buyers accumulating stocks worth $9.19m followed by $3.57m by insurance companies and $2.77m by companies. Net selling was witnessed by individuals worth $5.18m who were waiting to quit at lesser losses. Mutual funds also remained on the sell side, disposing of equity worth $4.28m, possibly to meet redemptions.

Major news flow during the week included imposition of regulatory duties on dozens of items to curb imports and expansion of export products’ list eligible for tax concessions by the European Union.

Cotton exports reached 145,886 bales in October, FDI jumped 56pc in July-September and the country’s liquid foreign exchange reserves rose to $20bn.

OUTLOOK: The KSE-100 index is currently trading at price-to-earnings ratio of 8.3 times 2018 earnings, compared to Asia-Pacific regional average of 13.8 times. The stocks offer dividend yield of 6.1pc against 2.5pc by the region.

AHL Research is positive on the local market in the upcoming week mainly as a continuation of investor enthusiasm about the developments on the Rs20bn market support fund.

“Moreover, investors can be lured back into taking a bullish position on the back of improving volume and attractive valuations across the board,” analysts said.

BMA Capital Market stated in its report: “Over the coming weeks, we expect market to remain largely range-bound as macro framework and current political scenario is not supportive of a sustained rally.” However, the brokerage believes that positive surprises in upcoming results could ignite investor interest in selected names.

Elixir Securities stated that the upcoming week would witness corporate result announcements by most remaining listed entities.

Published in Dawn, October 22nd, 2017