Stock market expected to resume upward trajectory amid appealing valuations

• Foreigner selling continues this week.
• Positive contributions come from week's last session.
• Current account balance arrives at surplus, says expert.

KARACHI: The stock market is anticipated to continue its upward trajectory amid appealing valuations, despite experiencing turbulence in the final week, The News reported.

The marked concluded the week on a strong note on Friday. 

“We expect the market to maintain its positive momentum in the coming week, supported by certain scrips trading at attractive valuations, which are likely to continue enticing investor interest,” mentioned a Arif Habib Limited Research report.

“Moreover, with the result season commencing from next week, certain scrips are expected to be in the light, driven by the expectation of strong financial results.”

Political unpredictability and rising crude oil prices were the main causes behind the market's volatility throughout the week. Positive developments did, however, offer some support on the economic front.

The KSE-100 index increased 2,025 points (+1.8%) week over week to close at 115,272 points in spite of the mixed signals. The average value traded finished at $115.8 million (up 1.1% WoW), while average volumes reached 558 million shares (down 28.7% WoW).

In contrast to last week's net sell of $5.7 million, foreigner selling continued this week, clocking in at $8.7 million (4-days). Banks saw the most significant sales ($3.5 million), followed by other industries ($2.6 million). Individuals ($12.8 million) and corporations ($8.5 million) reported purchasing on the local front.

Commercial banks (619 points), electricity generation (357 points), pharmaceuticals (320 points), cement (199 points), and technology & communication (195 points) were the sectors that made positive contributions. Whereas, United Bank Limited (427 points), Hub Power Company (360 points), MARI (120 points), Searle Pakistan (100 points), and LUCK (97 points) were the scrip-wise positive contributors.

Meanwhile, the sector that contributed negatively was sugar (23 points). Scrip-wise negative contributions came from Oil & Gas Development Company (64 points), Pakistan Petroleum Limited (53 points), Pakistan Aluminium Beverage Cans (31 points), Askari Bank Limited (30 points) and JDW Sugar Mills Limited (23 points).

According to a research report by Topline Securities, this gain can be accredited to recovery after the market declined by around 3.7% last week as value investors came in to buy the dip. Besides, positive contributions came from the last trading session of the week on the back of the conviction of the former prime minister on corruption charges.

Analyst Abdul Basit at JS Research said during the week, the current account balance arrived at a surplus of $582 million for December 2024, taking H1FY25 surplus to $1.2 billion, mainly led by higher remittances and controlled trade deficit.

Further, the United Arab Emirates (UAE) confirmed the rollover amounting to $2 billion for another year, maturing in January 2025. Pakistan is also preparing to launch panda bonds with an initial offering target of $200-250 million, aiming to support external financing further.

The World Bank has pledged to provide $40 billion to Pakistan over the next 10 years under the Country Partnership Framework (CPF).

In the recent PIB auction, the government raised Rs385 billion against a target of Rs350 billion, with yields dropping by 19 to 61bps varying between different tenures.

In other news, the cabinet approved the ongoing negotiations with 14 IPPs, estimated to provide power consumers relief of up to Rs137 billion annually.

Large scale manufacturing index posted a negative growth of 4.0% YoY during November 2024, while the 5MFY25 LSM index fell 1.2% YoY. SBP reserves remained stable at $11.7 billion (up $30 million WoW). Passenger car sales surged by around 60 % in December 2024.