Higher-high and higher-low week-on-week
Earlier in the week on Thursday, the market peaked at 39,716 points on the benchmark index before investors reverted to profit taking, halting the bull-run
The benchmark KSE-100 index increased 377 points week-on-week amid a dramatic last session on Friday to close at a record-high 39,528 points, gaining 0.96pc. Volumes remained suppressed as the market continues to consolidate on these new levels. Trading started at 2.15pm on Friday as technical breakdown at the bourse kept the session suspended for the first half.
On a weekly basis, the index registered a higher-high and a higher-low, indicating that the dominancy of the Bulls is likely to continue into the next week – targeting 39,800 – 39,995 points on the benchmark index. An extension of this momentum might allow investors to witness the KSE-100 index cross the next psychological barrier of 40,000 index points. However, it is pertinent to mention that capital gains have been very restricted despite this sharp rise of index to historic levels.
Earlier in the week on Thursday, the market peaked at 39,716 points on the benchmark index before investors reverted to profit taking, halting the bull-run. Cement stocks have largely led the rally, despite decline in export numbers. Lucky Cement’s announcement of capacity enhancement of its Karachi plant to the tune of additional 1.25m tons per annum made sure that the stock finished among top gainers during the week. The expansion project is worth $30m.
Foreign investors emerge net buyers
Foreign investors emerged as net buyers of $10.94 m during the week. After booking profits on last week’s conclusion citing technical grounds, the foreigners reverted to buying ways as the index accumulated strongly above the 39,000 level. Moving forward, the immediate support level is now defined between 39,150 and 39,250 points.
In the week prior to this one, FIPI numbers showed an outflow of $11.5m.
SBP foreign reserves slip 0.22pc
According to data released by the State Bank of Pakistan, the country’s foreign exchange reserves dipped slightly below $23 billion, largely due to payments of $83m on account of external debt servicing.
Three weeks ago, the SBP-held reserves increased 7.8pc on a weekly basis after it received $1,340 million from multilateral, bilateral and other official sources that included $501 million from the IMF, $502 million from the World Bank and $307 million from the Asian Development Bank.
Yen appreciation dents auto-sector; IMF says Yen close to fair value
In the automobile sector, PSMC (-7.31pc) remained suppressed due to less than expected earnings on the back of declining margins and lower sales. Additionally, the recent appreciation of Yen on the back of steps taken by BOJ (Bank of Japan) would not bode well for the gross margins of the assemblers such as HCAR, INDU and PSMC.
The International Monetary Fund said the yen’s surge this year has brought the Japanese currency closer to its fair value, in an assessment that contrasts with expressions of concern by the country’s policy makers about the exchange rate. However, the chief economist at IMF has ruled out any option to devalue the currency by interfering in the markets, commenting that a more comprehensive policy package is required to counter deflation risks.
Oil in bear territory again
Brent, the international crude market, fell as low as $42.11 per barrel on Friday morning, down more than 20 percent from its intraday peak of $52.86 per barrel on June 9. A 20 per cent decline is the technical definition of a bear market.
West Texas Intermediate (WTI), the main US crude benchmark, fell as much as 43 cents to $40.69 on Friday. Both contracts are now below their 200-day moving averages. These are considered key technical levels, and now that they have been breached, it could trigger further selling.
Nevertheless, it seems that the oil market is now reaching a balance and will settle somewhere around the $35 range. This would mean that oil stocks in the Pakistan Stock Exchange might have already touched their lows and accumulating with strict stop losses should be the preferred strategy.
