KARACHI: The Pakistan Stock Exchange (PSX) carried forward the strong momentum built over the earlier week as several positive factors helped boost investor confidence. The benchmark KSE-100 index added 979 points (2.9 per cent) during the week to close at 34,719 on Friday.

The index finally managed to break through the resistance level of 34,000 after five months. Resurgent international oil prices on the back of weaker dollar and falling US production; better-than-expected corporate results; optimism on the potential reclassification of MSCI Pakistan among emerging markets in June; and Federal Board of Revenue’s confirmation of reduction in corporate tax rate by one percentage point from the coming fiscal year drove the market volumes higher.

In the heat of the moment, investors shrugged off the Finance Minister Ishaq Dar’s declaration of extension of super tax for one more year and the turbulence on the political front.

Average daily volume increased 1pc to 242.4 million shares, whereas average daily value climbed 17pc to Rs11.1 billion in the outgoing week.

Analysts at Topline Securities said general industrials, oil and gas, and industrial metals and mining were among the major gainers over the week as they rose 5.5pc to 6.2pc. On the flip side, fixed line communications and food producers fell 2.8pc and 1.4pc, respectively.

Analysts at Arif Habib Limited said: “The E&P [exploration and production] sector contributed 241 points (OGDC 144 points; PPL 62 points) to the index. However, the banking sector spurred the rally with the highest contribution of 355 points (HBL 182points; MCB 94 points).”

Heavyweight oil and gas and banking sectors closed up 5.8pc and 3.8pc week-on-week, respectively; the investor interest in the heavyweight banking stocks flared up as a result of limited decline in earnings for the first quarter of 2016; possibility of removal of tax on bonus shares and the possible inclusion of several big banks in MSCI Emerging Market Index.

Among local participants, mutual funds (net buy: $13.2mn) along with non-banking financial companies ($7.7mn) led the buying with focus on fertilisers, cements and banks.

On the foreign selling front, no surprises were witnessed as foreign institutional portfolio investment (FIPI) recorded a net outflow of $12.4m, focused on fertiliser, cements and banks. Corresponding figures of foreign net sales amounted to $28.2m in the preceding week.

According to brokerage KASB Securities, Pakistan Tobacco Company, Feroze1888, International Steel Limited, Nishat Mills and Packages Limited were the major gainers while Indus Dyeing, Pak Suzuki Motors, Lalpir Power Limited, Arif Habib Corporation, and PakGen Power Limited were the major losers during the week.

“The fertiliser stocks too garnered investor interest after the Oil and Gas Regulatory Authority revised down feed gas prices by Rs77 per million British thermal units (mmBtu) for fertiliser players. FFBL, a major beneficiary of this cut in gas prices, closed up 8pc week-on-week. Packages Limited (PKGS, +11pc) was also a key performer during the week, as the paper and board company announced better-than-expected January-March results,” noted analysts at JS Global.

Other key news during the week were: the International Monetary Fund (IMF) saying Pakistan can do it alone once its programme ends; Beijing willing to give $4.1bn loan under the China-Pakistan Economic Corridor for construction of road projects; Obama administration asking US Congress to approve $742m for Pakistan; and Moody’s Pakistan B3 issuer rating on balances reflecting strengthening growth and progress on structural reforms.

OUTLOOK: The market is at the fag end of the result season. Triggers for the extended bull run include continuing recovery in oil prices; budgetary proposals and the investors’ confidence on Pakistan’s inclusion in MSCI Emerging Market status. The KSE-100 index is currently trading at price-to-earnings (p/e) ratio of 8.6 times with dividend yield at 5.7pc against Asia-Pacific regional average of p/e at 14 times and dividend yield at 2.5pc.

Published in Dawn, May 1st, 2016