Stock Review.

Byline: Shabbir Kazmi

Bullish sentiments likely to attract investors

With the joy of a new year following through the trading floor for the first week of the year 2021 and the January effect in full steam (where investors re-allocate portfolios, driving volumes higher), the benchmark index of Pakistan Stock Exchange (PSX) gained 2.7%WoW to close at 45,654 points continuing the uptrend witnessed during the tail end of CY20.

Additional catalysts were in the form of significant headway on circular debt resolution efforts initiated by the Government of Pakistan (GoP) in August 2020. The surprise crude supply cut by Saudi Arabia lifted crude benchmarks and in turn bolstered the index heavy weights under E&Ps. Further support was witnessed in the form of strong investor participation in Commercial Banks, as supportive end of year result expectations drove bullish sentiments.

Other news flows driving sentiment included: 1) Pakistan's economic growth rate for the current fiscal year is forecast to remain subdued at 0.5%, despite the global economy may expanding at a much faster pace, 2) during a meeting of the CCOE power sector circular debt figure was stated to have surpassed Rs2.3 trillion as of 30th November 2020, up Rs156 billion over 5MFY21, at a rate of Rs31.2 billion per month, 3) the GoP is reportedly in the process of unveiling a Textile and Apparel Policy 2020-25 laden with cash subsidies and lower rates on utilities worth Rs960 billion to boost production and exports of value-added textile products with the restoration of the zero-rated regime for the five export-oriented sectors also on the cards and 4) Special Assistant to the Prime Minister on Power Tabish Gohar resigned from the post within a quarter, as chronic power sector challenges continue to haunt the government.

Stock driving the market higher included: FML, KAPCO, BYCO and MEBL, whereas laggards acting as a drag were: SHEL, GATI, and ANL. Average daily traded volumes climbed 18.3%WoW to 625.1 million shares, where as volume leaders included: BYCO, PRL, HUMNL and PAEL.

Broad based participation coupled with depth driving market upsides (multi sector) affirms the bullish momentum at play in markets, which is likely to continue through to results season. That said, dampeners in the form of rising commodity prices exposing external vulnerabilities or adverse tax and cost inflation from higher energy tariffs as preconditions for IMF EFF lending could prompt profit taking.

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