Pakistan Stock Exchange (PSX) is set to see some announcements of major financial developments, including monetary policy and inflation data, where tug of war between sellers and buyers could not allow the index to stage any big recovery.
Institutional and corporate support which emerged in the outgoing week would like to remain active.
The KSe-100 index closed the week gaining 1,156 points or 2.5% to 47,077 points. The index after run-up of 21 months crosses 47,000 points mark.
Abdul Azeem, head of research at Spectrum Securities said that the stock market is expected to sustain its positive trend in the upcoming week, driven by anticipated positive corporate result announcements, a reduction in inflationary pressures, increase in forex reserves, and the influx of foreign inflows, all of which are set to bolster market sentiments.
Nevertheless, the surge in international oil prices, uncertainties surrounding circular debt, and any increase in policy rate are expected to restrict the positive move in the market.
Faisal Dhedhi, Deputy Head of Sales at Foundation Securities, said that the market in coming session would move in a band of 47600 to 48000 points level where corporate results will anchor the bourses.
All eyes are on the Monetary Policy announcement and most analysts believe that rate will see a rise of 100 bps in line with IMF guidelines.
“The 100bps has been well-adjusted in the market but if flag raises beyond that, it would be 200 bps rise and the confidence might get shaken up,” Faisal said. This might lead to some erosion in share values, he added.
However with corporate results are showering in and giving healthy dividends the prospects of market getting strength is certain, Faisal explained.
He said that high yielding stocks will give hedge against inflation and fixed income securities as few are offering 20% yield.
Saad Rafi, Head of Sales at AL Habib Capital Markets, said the performance of stock market hinges around interest rate announcement.
“In my opinion, the SBP would have to raise interest rate by 100 bps, which would be well taken by the investors club”, he said.
But if the key rate is up by 200 bps, the index would suffer widespread erosion because all the debt ridden companies will suffer the burnt, he added.
Already financial results have provided cushion and investors believed that banks profits will report higher earnings enticing investors to go for more shopping in this group.
Forex Market
Faisal Dehdi said foreign currency will remain in hot waters. “With interim government to saddle in next month, currency will see depreciation of Rs5 to Rs7 as business confidence will be undecided about the fate of the key economic measures”.
During the interim government, usually currency has been on the losing side, however with first review with IMF to fall in September, measures might place things in check”, Faisal said.
“With elevated interest rates and national currency undervalued on the REER index, Rupee is going to stay range bound”, Faisal Mamsa, CEO, Tresmark.
Especially as Asian Development Bank (ADB) and World Bank’s commitments will start to materialise and China having rolled over some of its debt, the ‘go slow’ on opening new LCs is still in place, he said.
