KARACHI: The Pakistan stock market staged rally in another spectacular week with the KSE-100 index clocking in gains of 967 points (2.4 per cent) and settling at 42,023.

The index crossed the 42,000-barrier for the first time after Jan 28, which meant that it had managed to recover all of the mind-boggling losses suffered when the benchmark had its nadir at 27,228 in March.

It gathered momentum from the eye-popping gains of 1,434 points (3.6pc) that the benchmark had secured in the preceding week. Observers say that good days continue to roll for the country’s equities as it has reaped positive returns in the previous 12 out of 13 weeks.

The market is flush with liquidity as the investible surplus with individuals and institutions see no other avenues to park money for a high return. Individuals in droves are therefore heading to the stock market in search of fortune in shares, albeit risk prone investment.

Liquidity shift was observed from fixed income to equities triggered by low interest rates in the country. Average daily volume skyrocketed to 745 million shares, representing escalation of 70pc over the preceding week. Veterans said that such huge turnover was last seen in 2005.

The market set new record on Wednesday with the volume that jumped to a staggering 919m shares, which represented over a 15-year high turnover. Traded value also jumped 37pc to $139m.

Besides nearly an end to the Corona-19 active cases that helped the economy to open up, the CPI for August released during the week at 8.21pc, compared to 9.21pc in July, put more confidence in the investors who started to visualise the growth in economy with optimism.

Improving external accounts, foreign exchange reserves and the rupee appreciating against at Rs165.77 to a dollar also kept the sentiments positive. Furthermore, oil sales in August witnessed a jump of 21pc. The havoc caused by record rainfall and flash floods that inundated industrial units did nothing to spoil the investor sentiments.

Foreign selling clocked in at $10m compared to a net sale of $0.8m the earlier week. Outflow was witnessed in commercial banks amounting to $5.2m and cements $2.6m. On the domestic front, major buying was reported by individuals of shares worth $15.4m, followed by mutual funds which picked up equities amounting to $8.6m. Among local participants, banks were major sellers worth $5.9m.

Sectors such as oil marketing companies, fertilisers, power, refinery and chemicals outperformed the benchmark index. Consumer stocks including engineering and cyclicals - steel and cement - remained key performers during the week. Interest in consumer scrips was primarily induced by the low-interest-rate environment.

On the flip side, exploration and production stocks remained laggards relative to the index due to news of government’s decision to sell 7pc and 10pc stakes in Oil and Gas Development Company and Pakistan Petroleum, respectively. Auto assembler and power generation and distribution sectors also remained under pressure. Scrip-wise positive contributions were led by Systems Ltd, higher by 65 points, Hascol Petroleum 65 points, Colgate Palmolive 55 points, Maple Leaf 53 points and Mari Petroleum 53 points.

Going forward, pundits were pinning hopes on Prime Minister Imran Khan’s visit to Karachi on Saturday and allocation of funds for its massive rebuilding of infrastructure. Rest of the financial statements to be unveiled during the week could also hold investors’ interest in equities. It was thought that the key highlight would be the T-bills’ auction in which the government plans to borrow Rs350 billion as against the maturity of Rs494bn.

Published in Dawn, September 6th, 2020