PSX struggles amid gloomy outlook

Falls owing to political and economic uncertainty, concerns about IMF loan

KARACHI:

Bearish sentiment prevailed at the Pakistan Stock Exchange during the outgoing week, as bears continued to push bulls to the sidelines in the absence of market-moving positive cues.

The rupee depreciation against the US dollar continued during the week amid rapidly depleting foreign exchange reserves, which kept the jittery investors at bay.

To add to the woes, scepticism about the revival of International Monetary Fund (IMF) loan programme dented the interest of market participants, thus they eagerly waited for any positive stimulus to assume fresh positions.

Consequently, the benchmark KSE-100 index closed the week with a decrease of 386 points, or 0.89%, at 43,101 points.

“The decline can be attributed to investors’ concern over the declining foreign exchange reserves and the lack of intention of the new government to take tough measures for the revival of IMF programme,” a report of Topline Securities stated.

The week began on a dull note as the benchmark index nosedived 819 points on the very first day, as the investors failed to find any positive triggers amid the deteriorating political and economic situation in the country.

The rupee continued its downtrend in the outgoing week as well, which kept the trading environment tense.

Furthermore, the delay in meeting the IMF’s conditions for the revival of loan programme also haunted trading at the domestic bourse.

However, the next two trading days witnessed some respite as the benchmark index added around 360 points cumulatively to ease some pressure on the stock market.

Investors assumed fresh positions at attractive valuations due to the plunge in the market on the first trading day.

Moreover, optimism following the resumption of talks between Pakistan and the IMF also encouraged the market players to make fresh purchases.

On Thursday, though, the index again came under some pressure, as it fell around 43 points to close in the negative zone.

Bulls and bears were seen locking horns throughout the day mainly due to the continuously dwindling rupee and depleting forex reserves amid absence of any positivity.

However, investors’ interest rejuvenated on the last trading day of the week as news of the ban on imports of luxury items surfaced in the media.

The decision was in line with the IMF’s condition, therefore, it was widely cherished by the market players, who were keenly looking for the positive cues.

“A key event to look out for in the upcoming week is the State Bank of Pakistan’s Monetary Policy Committee (MPC) meeting on Monday, whereby we expect a 100-basis-point rate hike,” stated a report of Arif Habib Limited.

“However, after the verdict of the ECP (Election Commission of Pakistan), disallowing votes of 25 PTI MPAs, political clouds will once again hover on the horizon,” the report said, adding “we believe that the market will only heave a sigh of relief once clarity emerges on the IMF programme.”

During the week under review, average daily traded volume decreased 19% week-on-week to 221 million shares, while average daily traded value declined 26% week-on-week to $31 million.

In terms of sectors, positive contribution came from chemical (66 points), fertiliser (19 points), engineering (15 points), paper and board (13 points) and automobile assemblers (10 points).

On the flip side, sectors which contributed negatively included oil and gas exploration companies (148 points), cement (110 points), commercial banks (99 points), pharmaceuticals (36 points) and technology and communication (27 points).

Meanwhile, stock-wise positive contributors were Engro Polymer and Chemicals (67 points), Fauji Fertiliser Company (43 points), Engro Fertilisers (15 points), Packages Limited (13 points) and National Bank of Pakistan (13 points).

However, negative contribution came from Lucky Cement (59 points), Pakistan Petroleum Limited (51 points), Oil and Gas Development Company (43 points), Meezan Bank (40 points) and Mari Petroleum Company (36 points).

Foreign selling was witnessed during the week under review, which came in at $6.1 million as compared to net selling of $1.9 million in the previous week. Major selling was witnessed in fertiliser companies ($1.9 million) and banks ($1.3 million).

On the domestic front, buying was reported by banks ($11.5 million), followed by individuals ($4.4 million).

Among other major news of the week, the government decided not to raise petroleum prices, former Pakistan Tehreek-e-Insaf (PTI) government took $52 billion in loans and repaid $36.05 billion, MSCI (Morgan Stanley Capital International) unveiled results of its May Semi-Annual Index Review, Federal Board of Revenue (FBR) agreed to resolve sales tax refund-related issues and Hub Power Company (Hubco) sought exemption from the application of International Financial Reporting Standards-9 (IFRS-9) on behalf of all independent power producers (IPPs).

Published in The Express Tribune, May 22^nd, 2022.

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