Stocks climb up on China loan rollover

Benchmark KSE-100 index gains 956 points to settle at 42,085

KARACHI:

Bulls dominated trading at the Pakistan Stock Exchange (PSX) during the outgoing week with four sessions closing in the green. Investors’ buying interest revived as soon as China agreed to refinance a $2.24 billion loan. Investors took fresh positions as the week began with positive news that the government was engaged in talks on rolling over Chinese SAFE deposits of $2 billion.

The week saw lower CPI inflation numbers for September 2022, which triggered optimism among market players. The bourse remained buoyant for two more days when the KSE-100 index rose above 42,000 points. Bulls also extended their run as investors cherished continued recovery of the rupee against the US dollar in the inter-bank market.

The Asian Development Bank’s announcement that it would provide further flood relief support, which was expected to be received during the current month, boosted investor confidence. However, the situation changed and a bearish spell took over the bourse on Friday amid Moody’s report that dampened investor sentiment. The ratings agency downgraded Pakistan’s credit rating to Caa1 from B3 due to increased liquidity and external vulnerability risks. The week closed at 42,085, up 956 points from the previous week. “Bulls remained in charge as the KSE-100 index gained 2.3% week-on-week,” said JS Global analyst Muhammad Waqas Ghani.

Carrying last week’s bullish momentum, the index closed higher. Investor participation also rebounded, recording 118% weekon-week growth from a low base, he said. Among key performers were technology firms (8.9%) and power companies (6.3%) while the banking sector (0.2%) was the key under-performer. On the news front, Finance Minister Ishaq Dar announced subsidised electricity rates for the export sector. The arrangement would cost the government around Rs90-100 billion. The rupee continued to appreciate against the US dollar, gaining 3.7% weekon-week.

State Bank’s forex reserves dropped $106 million to $7.9 billion, which translated into an import cover of less than six weeks. On the international front, OPEC+ agreed to significant cuts in oil output, reducing supplies in an already constrained market. Among local industry news, cement sales declined 7% year-on-year to 4.3 million tons in September 2022. Furthermore, Honda announced the shutdown of its plant from October 4 to 11, 2022 citing supply chain disruptions as a major reason, JS analyst said.

Arif Habib Limited, in its report, said that in the outgoing week the market continued its upward trend as China agreed to refinance a $2.24 billion loan and the government was in talks on rolling over China’s SAFE deposits of $2 billion. Additionally, the trade deficit shrank 21.4% year-on-year to $9.2 billion, which helped the KSE-100 index sustain the momentum. Furthermore, Pakistani rupee appreciated against the greenback, closing at 219.92 (up Rs8.53, or 3.7% week-on-week).

Also, the ADB announced that it would provide an aid of around $2.3-2.5 billion in the wake of natural disaster that occurred in Pakistan. However, Moody’s cut Pakistan’s sovereign credit rating from B3 to Caa1 due to increased liquidity and external vulnerability risks, keeping the bourse in check. The market closed at 42,085, gaining 956 points (or 2.3%), the AHL report said. In terms of sectors, positive contribution came from technology and communication (360 points), power generation and distribution (251 points), cement (129 points), fertiliser (115 points) and chemical (44 points). Negative contribution came from miscellaneous (44 points), and paper and board (6 points).

Meanwhile, stock-wise positive contributors were Hub Power (227 points), TRG Pakistan (171 points), Systems Limited (170 points), Engro Corporation (66 points) and Engro Fertilisers (61 points). Negative contribution came from Pakistan Petroleum (48 points), Pakistan Services (41 points), MCB Bank (26 points), United Bank (24 points) and Fatima Fertiliser (11 points). Foreigners continued to buy stocks during the week under review, making $4.7 million of purchases compared to net buying of $0.15 million last week. Major buying was witnessed in technology firms ($6 million), power companies ($0.4 million) and cement manufacturers ($0.3 million). Average daily volumes came in at 434 million shares (up 118% week-on-week) while average traded value settled at $48 million (up 32% week-on-week)