KARACHI: The bullish fervour at the stock market continued in the outgoing week with the benchmark KSE-100 index recording spectacular gains of 1,442 points (4.37 per 2cent) and closing at 34,476.

In the eight weeks since August the index has risen 19.8pc.

The investors’ exuberance was underpinned by the stable rupee in the past three months; potential Eurobond and sukuk issues expected to shore up forex reserves. The positive feedback by the Asia Pacific Group’s report on money laundering in which Pakistan was fully compliant on one criterion, partially compliant on 26 criteria and largely compliant on nine criteria as of October 2018, while the government has taken material steps to address issues in the four areas of non-compliance.

The report along with other news flow suggested that Pakistan would be able to stave off the FATF black list, the decision on which would be taken at the meeting of watchdog in Paris, from Oct 13 to 18. Prime Minister Imran Khan’s visit to China in which satisfaction was expressed on CPEC progress further improved overall sentiment.

But by far the major development that sparked investors’ frenzy for stocks was the falling yields in the local currency bond market. The benchmark 10-year PIB traded at 11.34pc on Friday down from 12.03pc a week back. In last 2 months PIB yields have fallen by close to 250 percentage points. It raised expectations of interest rate softening in the next SBP Monetary Policy review.

The bullish momentum attracted more participants to the equity markets where the average daily volume for the outgoing week was up by 28pc over the earlier week to 284m shares. Overall value traded increased by 42pc to $56.9m. On Friday the value traded at the market jumped to Rs10.5bn, which was the highest in the calendar year 2019.

Foreign investors offloaded stocks worth of $4.15m compared to a net sell of $4.7m the earlier week. Major foreign selling was witnessed in commercial banks ($4.56m). On the local front, stocks purchase was reported by companies ($3.91m); individuals ($4.36m) and other organisations ($3.59m). Banks and insurance were net sellers of $4.13m and $4.75m worth equity.

Sector-wise, major developments was marked in cement sector where manufacturers in the North increased prices by Rs15-20 per bag which was the major driver for the cement scrips throughout the week. Other major contributors to the index were commercial banks, oil and gas exploration companies, fertiliser and pharmaceuticals.

Leading gainers were HBL, Mari Petroleum and UBL adding 373 points to the index. Other contributors were POL and Hubco. Whereas, scrip-wise major losers were International Steel and EFU Life.

In the upcoming week, the pundits say the market would be influenced mainly by the outcome of the FATF meeting where Pakistan case would come up for review. Growing optimism on status quo and avoidance of the black listing would be a positive for the market.

Improving external account position, possible foreign net inflows in T-bills and lower inflationary reading expected in October would be other triggers. The week would also herald the financial reporting season with HBL, ABL, MCB, APL, ACPL, ISL, EPCL, LOTCHEM and EFERT scheduled to unveil their numbers.

Published in Dawn, October 13th, 2019