Handling of economic challenges to guide investors’ sentiments next week

LAHORE: Experts believe the relief rally is to be fizzled out gradually over the upcoming week following the shift of focus on key economic challenges taking the centre stage.

Talking to Pakistan Today they were of the view that handling of economic challenges would guide market sentiments. The market, they say, will also closely track the progress on the formation of the government at the centre and provinces. They say that investors are likely to stay defensive on perceived outcomes for sectors, capital as the PTI-led government firms up its cabinet, legislative priorities and policy imperatives.
On the other hand, the start of the result season may provide some cushion to the market performance as investors cherry-pick stocks to benefit from year-end dividends announcements in addition to earnings surprises.
Some of the big tickets that are scheduled to announce their year-end/half yearly results in the coming week may push or drag market sentiments that let the market stage a handsome rally during last week, gaining 1,565 points to close at 42,786 points. Investors cheered the smooth conclusion of general elections 2018 taking the market getting up to 3.8 per cent against last week. Wider news flows during the week including citing a slew of economic challenges, MNA-elect Asad Umar stated of all options, including approaching the IMF were on the cards with the urgency of reforms expected to be at the forefront of a PTI-led government while SBP’s reserves decreased by $53 million to $9.01 billion.
Contrary to street expectations of a weak coalition government at the center, Pakistan Tehreek-e-Insaf (PTI) emerged as the leading party capable of comfortably forming a relatively stable coalition govt. Likewise, the market breached an important psychological resistance placed at 42,000 level. The optimism driven by political clarity was witnessed in participation as well, where ADTO improved by 7.3 per cent to 235 million shares while ADTV was simultaneously up by 4.3 per cent to $70 million.
Taking advantage of positive sentiments at the local bourse, foreign investors offloaded stocks worth $0.4 million at the local bourse. Foreign investors’ selling was mainly concentrated in Oil and Gas Exploration that was registered as $6.9 million and commercial banks for $2.2 million. Active participation was witnessed in the banking sector by the local and foreign investors where HBL, UBL, NBP and MCB all closed in the green zone. On the other hand, individuals and companies provided most liquidity to the bourse amongst local investors with $18.9 million and $1 million.
Fertilizer offtake data for June 2018 was released by National Fertilizer Development Centre (NFDC), where urea offtake clocked in at 608k tons, down 43 per cent, while DAP offtake increased by 70 to 190 thousand tons on a yearly basis.
On the macro front, Pakistan’s foreign exchange reserves increased by 0.29 per cent of $15.73 billion, however, reserves held by the State Bank of Pakistan recorded a decline of $53 million to $0.01 billion, due to routine external debt financing.
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