The Pakistan Stock Exchange exhibited recovery during the outgoing week mainly due to the release of Letter of Intent (LOI) by the International Monetary Fund (IMF) and as a result it gained 761 points, closing the three-day week in green zone.
The week commenced with a rally as market players cheered the positive triggers. The directive given by the finance minister to hold a meeting to consider the matter of state-owned enterprises’ dividends triggered the buying activity.
Moreover, Pakistani rupee recovered against the US dollar in the inter-bank market, which further aided the bullish close of the bourse.
However, the market reversed the trend on Thursday as the benchmark KSE-100 index dropped over 250 points owing to the lack of positive triggers, which pushed investors to go for profit-taking.
The market turned around on Friday with a sharp rally, gaining over 600 points. Investor sentiment got strengthened as the bourse witnessed buying activity. The bullish rally continued to grip the stock market and became stronger over the Letter of Intent received from the IMF, which pushed the country closer towards the revival of stalled loan programme.
Apart from that, the continued recovery of the rupee against the US dollar fuelled bullish trading.
Volumes remained healthy with an increase of 28% week-on-week. Subsequently, the KSE-100 index gained 761 points to close at 42,857.
“Continued appreciation of Pakistani rupee against the US dollar, decline in Pakistan’s international bond yields and positive development on the IMF front led the market to rally this week,” said JS Global analyst Faisal Irfan.
Volumes increased 28% week-on-week to an average of 343 million shares traded per day. Key outperformers were refineries (+5.5%), power sector (+5.1%) and oil and gas exploration companies (+4.1%).
The week started with the announcement of $1 billion investment by the UAE in Pakistan. Moreover, the country got one step closer to the revival of IMF loan programme with the receipt of Letter of Intent. Those positive developments led to further rupee appreciation of 4.1% against the US dollar, fuelling positive investor sentiment. On the flip side, foreign currency reserves declined by $555 million on the back of debt servicing.
On the news front, the finance minister announced that a special tax on the basis of lower ADR would not be applicable to banks on a retrospective basis.
Urea/DAP offtake was expected to decline 37%/65% year-on-year during July while PSO received Rs62 billion for the confirmation of Letters of Credit for purchase of petroleum products, the analyst added.
Arif Habib Limited, in its report, said that the three-day week commenced on a positive note amid optimism about the disbursement of IMF loan among the international financial institutions.
Furthermore, Pakistani rupee strengthened again against the greenback, appreciating Rs8.55 per dollar (3.82%) week-on-week to close at Rs215.49.
Investor confidence improved further after Pakistan received the Letter of Intent from the IMF (which indicated the disbursement of a $1.7 billion tranche for the combined seventh and eighth review).
The market closed at 42,858 points, gaining 761 points (1.8%) week-on-week. In terms of sectors, positive contribution came from banks (224 points), exploration and production (205 points), power (84 points), automobile assemblers (55 points) and oil marketing companies (53 points).
Sectors that contributed negatively included cement (23 points) and tobacco (15 points). Meanwhile, stock-wise positive contributors were Oil and Gas Development Company (79 points), Pakistan Petroleum (69 points), Meezan Bank (67 points), Pakistan Oilfields (56 points) and Hub Power Company (52 points).
Negative contribution came from Pakistan Services (63 points), Nestle Pakistan (17 points), Engro Polymer and Chemicals (16 points) and Pakistan Tobacco (15 points).
Foreigners were net sellers as they sold $0.9 million worth of shares compared to net selling of $0.7 million in the previous week. Major selling was witnessed in banks ($1.6m) and cement ($1.3m).
Published in The Express Tribune, August 14th, 2022.
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