Stocks shed value on back of rate hike

Benchmark KSE-100 index loses 786.63 points and settles at 42,150.10

KARACHI:

The performance of Pakistan Stock Exchange (PSX) remained unimpressive during the week ended on December 2, 2022 as investors offloaded stockholdings in the wake of political tensions, delay in the International Monetary Fund’s (IMF) ninth review and a surprise increase in the State Bank’s policy rate.

The benchmark KSE-100 index shed 786.63 points, or 1.8% week-on-week, and closed at 42,150.10. At the start of the week, the bourse took a deep plunge losing 865 points over the rise in policy rate and announcement from Pakistan Tehreek-e-Insaf (PTI) that it would dissolve the provincial assemblies in Punjab and Khyber-Pakhtunkhwa.

However, next day, the market recovered partly following the receipt of $500 million in development programme financing from the Asian Infrastructure Investment Bank (AIIB). For the next two days, the PSX remained range bound and made little movement with investors awaiting clarity on the political and economic fronts.

On the last trading day, the investors came under pressure and sold shares in the wake of poor exports data and announcement of a significantly high inflation reading. “The KSE-100 index declined on a week-on-week basis, which can be attributed to the increase in benchmark interest rate by 100 basis points to 16% in the latest monetary policy announcement,” said Topline Securities.

JS Research, in its report, commented that the KSE-100 index reacted to the unexpected policy rate hike and fell 786.63 points, or 1.8% week-on-week, closing at 42,150.10. The bourse opened the week on a pessimistic note after the unexpected rate hike of 100 basis points, it said. “The market witnessed a partial recovery in the following days, closing the week at 42,150 points and limiting losses to 1.8% WoW.”

On the news front, crude oil prices increased during the week as OPEC+ delegates did not rule out deeper production cuts in the upcoming meeting over the weekend. On the domestic front, political noise remained high. IMF Country Representative Esther Perez confirmed that virtual engagements had resumed with Pakistan and the visit of an IMF team could be expected soon.

The Consumer Price Index (CPI) came in at 23.8% year-on-year for November 2022, averaging 25.14% for 5MFY23 as against 9.32% in the same period of last year.

Tax collection improved as the Federal Board of Revenue (FBR) achieved both its monthly and five-month targets with revenues of Rs538 billion and Rs2,688 billion respectively.

State Bank’s foreign currency reserves declined by $327 million to $7.5 billion, but they were yet to reflect the receipt of $500 million from the AIIB, the report added.

In its market commentary, AHL Research said that the stock market commenced trading on a negative note amid a surprise policy rate hike by the SBP on Friday last week coupled with political noise. The index lost 973 points during intra-day trading.

However, it said, the momentum briefly turned positive after the central bank received $500 million from the AIIB. “With this, Pakistani rupee appreciated against the greenback, gaining Rs0.25, or 0.11% WoW, to settle at Rs223.69.

However, the bourse shifted back to the negative zone after the release of trade data that depicted 24% month-on-month increase in deficit in November 2022.

The market closed at 42,150, shedding 787 points (or 1.8% WoW). Sector-wise, negative contribution came from cement (243 points), technology (101 points), fertiliser (83 points), E&P (70 points) and banks (62 points).

Sectors that contributed positively were miscellaneous (82 points) and power (48 points).

Stock-wise, negative contributors were TRG (102 points), Lucky Cement (79 points), Cherat Cement (43 points), Millat Tractors (39 points) and Maple Leaf Cement (38 points).

Meanwhile, positive contribution came from Pakistan Services (87 points), Hubco (59 points), Systems Limited (24 points), HBL (12 points) and Ibrahim Fibres (4 points).

Foreigners’ buying continued during the week under review, settling at $6.6 million compared to net buying of $1.1 million last week. Major buying was witnessed in E&P ($2 million), cement ($1.8 million) and technology ($1.6 million).

On the local front, selling was reported by mutual funds ($6.3 million) followed by broker proprietary trading ($2.1 million).

Average trading volumes came in at 162 million shares (up by 1% WoW) while average value settled at $24 million (down by 7%).

Published in The Express Tribune, December 4^th, 2022.

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