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Stocks rebound as investors pick attractive values

Updated October 21, 2018

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The Pakistan Stock Exchange building.— File
The Pakistan Stock Exchange building.— File

KARACHI: Stocks staged strong rebound in last three days of the outgoing week which helped the KSE-100 index to close with healthy gains of 912 points (2.4 per cent) to settle at 38,430.

Investors rushed to build positions in stocks trading at attractive valuations, leading the market to bounce back from its June 2016 low of 36,496 points. The market recovery during the week came as a relief for investors who had seen intense bloodletting in the previous two weeks causing loss of a staggering 3,480 points (8.68pc).

In the first two trading sessions, the stocks dipped 854 points but the tide turned after investors regained confidence as government was seen to be making strenuous efforts to address the external woes.

Finance Minister Asad Umer’s comments regarding entry into an International Monetary Fund programme within two months as well as potential funding from other multilateral agencies, fuelled investor optimism.

Moreover, the prime minister’s second visit announcement to Saudi Arabia before scheduled visit to China and developments on Financial Action Task Force front also added to positive sentiments.

The government’s intention to rationalise the taxation regime for capital markets was warmly greeted by the market. Finally, the imposition of regulatory duties on 570 imported goods was considered a step in the right direction to control the rising import bill.

Market activity improved with average daily trading volume increasing by 13pc to 199 million shares. However daily average traded value fell by 5pc to $49m as most of the activity was concentrated in low-priced stocks.

Foreign investors sold shares worth $19.1m during the week against net selling of $32.6m the preceding week. Foreign sell-off was witnessed in commercial banks at $8.3m and exploration and production $2.9m whereas domestic companies bought stocks worth $5.8m and individuals $5.1m.

Sectors that stood out as major drivers of a bull run during the week were cements, adding 171 points, oil marketing companies 118 points and fertilisers 101 points, automobile assemblers 89 points and oil and gas exploration companies 81 points. On the flip side, negative contributions came from commercial banks, lower by 34 points and tobacco 26 points.

Scrip-wise, top gainers were DG Khan Cement, up 52 points, Pakistan Oilfield 52 points, Pakistan 52 points, Indus Motor Company 50 points and Pakistan International Bulk Terminal 50 points.

Going forward, analysts at Arif Habib Ltd stated that with Imran Khan visiting Saudi Arabia in the upcoming week (Oct 23) and China (Nov 04), consensus on external financing arrangement may be finalised soon.

While this may help lift sentiments of the domestic market participants, foreign investors may continue to remain cautious in all regional emerging markets. However, since the valuations appear enticing, a re-entry of foreign funds in the bourse cannot be ruled out.

Published in Dawn, October 21st , 2018