KSE-100 recovers in short trading week

Plunge in current account deficit, resolution of Reko Diq dispute fuel bullish momentum

KARACHI:

Despite the prevailing uncertainties on the domestic and international front, the Pakistan Stock Exchange exhibited some recovery during the past week mainly owing to the plunge in current account deficit (CAD) during February 2022 coupled with the landmark resolution of the Reko Diq dispute.

Subsequently, the benchmark KSE-100 index closed the week with an increase of 521.17 points or 1.21% at 43,551 point level.

“Some recovery was observed in the market which can be attributed to stark decline in current account deficit number for the month of February - clocking in at $545 million,” a report from Topline Securities stated.

The week commenced with a rally as market players strongly cheered the drop in Pakistan’s current account deficit to eight month low value. Moreover, upbeat development on the Reko Diq front drove bullish trading.

Last weekend, the country managed to escape a penalty of $11 billion after reaching an out-of court settlement on the Reko Diq project and secured promise of investment worth $10 billion in Balochistan that would create 8,000 new jobs. Consequently, the investors cherry-picked stocks across-the-board at attractive valuations. The bourse recorded a turnaround on Tuesday and witnessed profit-taking as slide in rupee against the US dollar played on investors mind and motivated them to stay on the sidelines. Persistent political turmoil in the country also took a toll on the bourse.

The market, however, overturned the bear-run during the last two trading days of the week and posted a modest rally.

The buying activity was observed mainly due to anticipation of the resolution of domestic political issues. On the flip side, a jump in yields in the latest T-bills auction in the secondary market capped the gains at the bourse.

“We expect the market to remain range-bound next week due to political unrest and the upcoming vote on no-confidence,” stated a report from Arif Habib Limited. “Market participants should also remain wary of high commodity prices, any indication of oil prices cooling down will also aid the sentiment in the local bourse.”  During the week under review, average daily traded volume declined 17.4% week-on-week to 143.7 million shares, while average daily value traded decreased 1.5% week-on-week to $25.8 million.

In terms of sectors, positive contributions came from fertiliser (160 points), cement (97 points), power generation and distribution (57 points), commercial banks (56 points) and chemical (47 points).

On the flipside, sectors which contributed negatively included automobile parts and accessories (16 points), paper and board (6.95 points), miscellaneous (6.29 points), oil and gas exploration (4.02 points), and insurance (2.58 points). Meanwhile, scrip-wise positive contributors were Habib Bank Limited (93 points), Lucky Cement (84 points), Fauji Fertiliser Company (72 points), TRG Pakistan (64 points) and Hub Power Company (52 points).

However, negative contributions came from Systems Limited (42 points), United Bank Limited (41 points), Bank AL Habib (25 points), Thal Limited (16 points) and Habib Metropolitan Bank (11 points).

Foreign selling continued this week, clocking-in at $4.12 million as compared to a net sell of $4.9 million the previous week. Major selling was witnessed in banks ($5.9 million) and exploration and production ($0.8 million). On the local front, buying was reported by mutual funds ($5.3 million) followed by individuals ($2.6 million).

Other major news included, government failed to convince the International Monetary Fund (IMF) over amnesty scheme, cost of power generation rose 78% in July-Feb 2021-22, Toyota hiked prices by up to Rs1.2 million, banks granted on spot conditional approvals for loans worth Rs7.4 billion, non-textile exports jumped 26% to almost $8 billion, and Sensitive Price Indicator (SPI) declined 1.37% on a week-on-week basis.

Published in The Express Tribune, March 27^th, 2022.

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