Stock market gains 1.7% on budget optimism

KARACHI:

Bulls dominated the Pakistan Stock Exchange during the outgoing week as investors remained optimistic and started the trading week on a positive note amid the federal budget announcement.

The investors took fresh positions and opted to cherry-pick stocks as the week began with positive news that the government was setting the budget deficit target at a lower level at 5% for fiscal year 2023.

However, many investors preferred to remain on the sidelines ahead of the budget announcement due to which the bourse witnessed a decline. The market further lost hope over the depreciation of the rupee against the US dollar and news about the new taxes proposed in the upcoming budget.

Moreover, uncertainty about the IMF loan programme and decline in foreign exchange reserves greatly dented the investors’ sentiment.

However, the situation changed and a bullish spell took over the bourse as the investors remained optimistic about the upcoming budget announcement.

Bulls tossed the stock market above 42,000 points to close the week in the green zone.

Topline Securities, in its report, said that the benchmark KSE-100 index gained 1.7% on a week-on-week basis.

The gains can be attributed to the government’s resolve to take reform measures (imposition of new taxes and cut down subsidies) in the FY23 budget, which will pave the way for the IMF programme, where progress at the staff level is expected by next week, Topline said.

Investors preferred to remain on the sidelines before the FY23 budget announcement as during the week average daily traded volume and value declined by 19% and 27% to 169.8m shares and Rs4.4b respectively.

On flows end during the week, foreign corporate, overseas Pakistanis and mutual funds sold equities worth a net $3.78m, $2.52m and $2.08m respectively. However, the selling was absorbed by local companies as they purchased equities worth a net $8.6m.

JS Global said that Pakistan equities closed the week on a positive note at 42,015, up by 1.7% week-on-week.

The market maintained an upward trend throughout the week partially recovering from last week, it said. Investors remained focused on the federal budget for FY23, announced on June 10.

“The key challenge appears to be the need to tighten the fiscal situation, where recent interviews of officials and other media prints suggest that in addition to containing expenses and subsidies, higher revenue collection will be a key theme,” JS Global analyst Wasil Zaman said.

Oil and gas sector was among key outperformers during the week under review followed by cement and chemical sectors while the underperformers included banks over anticipation of imposition of taxes in the federal budget.

On the news front, cement sales declined by 6% month-on-month owing to the slowdown in construction activities whereas textile exports posted a growth of 59% year-on-year during May 2022.

Public debt climbed by 12.9% to Rs43.7tr during Jul-Apr FY22. Moreover, RDA inflows rose to $4.4b as of May 2022 compared to $4.2b as of last month.

On the external front, SBP’s reserves stooped low at $9.2b, dropping by $497m week-on-week while on the international front, crude oil hit a 13-week high, hitting $120+ amid anticipation of higher demand from China among other reasons.

Published in The Express Tribune, June 12^th, 2022.

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