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Index reaches the dizzy heights of 41,841 points

KARACHI: Events of the outgoing week will long be remembered by investors, as the KSE-100 index climbed 1,969 points (4.97 per cent) to close at an all-time high of 41,841 points.

It included the upsurge by 1,406 points on Tuesday, the highest-ever single-day gain.

Over the week, the benchmark recovered the heavy loss of 1,419 points (3.44pc) it suffered the week before.

The average daily volume for the outgoing week surged 42pc week-on-week to 484 million shares while the average daily value increased 41pc to Rs16 billion.

The market finished flat on the first day of the week. However, the investors’ mood brightened up on Tuesday when the Supreme Court stepped in to save the country from chaos expected in the wake of PTI’s promised lockdown of Islamabad.

Warring political parties reached a consensus on the appointment of a judicial commission to probe the contentious issue of Panama leaks. This dispelled fears of the derailment of the political process.

Investors, who were already happy about the upgrade of Pakistan by international credit rating agency Standard & Poor’s from B- to B, threw in a flurry of buy orders.

Foreigners were net buyers of stocks worth $21m during the week, which is a 13-week high. Banks, oil and gas marketing and electricity sectors saw a net foreign buying of $7.8m, $4.6m and $3.8m, respectively, whereas food producers saw a net outflow of $0.7m.

Out of 1,969 points gained by the index during the week, 649 points (65pc) were contributed by banks because of attractive valuations and the expectation of an interest rate hike following the announcement of higher-than-expected CPI for October.

“Among the top 10 stocks that added a cumulative 817 points to the index, four were banks,” noted the analysts at Arif Habib Limited. Habib Bank, United Bank, MCB Bank and Bank Alfalah contributed 491 points to the index.

The cement sector contributed 248 points and autos 113 points to the index upsurge. Topline Securities identified three top-gaining sectors as refineries, auto assemblers and oil and gas marketing companies, which went up 10.5pc, 10.5pc and 7.7%, respectively.

“Across-the-board buying was observed in sectors such as autos (10pc week-on-week), refineries (10pc), banks (6pc) and oil marketing companies (8pc),” analyst Faizan Ahmed at JS Global said. In contrast, sectors such as energy exploration and production (2pc) and fertilisers (3pc) underperformed the benchmark.

According to AKD Securities, major winning stocks during the week were Millat Tractors (22.9pc), Shell (20.3pc), Amreli Steels (17.1pc) and ICI (15.4pc).

Key highlights of the week were the government’s decision not to increase the natural gas tariff for any category of consumers, French automaker Renault’s entry with the investment of $100m, the release of cotton numbers (6.95m bales, up 7.5pc year-on-year), willingness shown by China to finance Pakistan’s portion of the Iran-Pakistan gas pipeline and the release of CPI inflation numbers (4.21pc year-on-year for October).

OUTLOOK: The KSE-100 index is currently trading at the price-to-earnings (P/E) multiple of 9.6 on the 2016 earnings, offering an attractive dividend yield of 5.1pc against the Asia-Pacific regional P/E average of 15.2 with a dividend yield of 2.4pc.

According to Arif Habib Limited, a relatively stable political situation in the country is expected to keep the market robust next week. However, the case of the Panama leaks in the Supreme Court can keep the market a little under pressure, leading to some profit-taking.

BMA Capital Management stated that with the political temperature having eased considerably, the attention will shift towards the fundamentals again. Continuity of foreign portfolio inflows can also keep the sentiments upbeat.

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