Stocks flat as investors stay on sidelines

KSE-100 index edges up by 49 points, or 0.12%, at 40,050

KARACHI:

Pakistan Stock Exchange opened the week on a negative note and experienced turbulent sessions for most of the week. However, the benchmark KSE-100 index managed to recover partially and closed flat with gains of 49 points.

At the beginning of the week, the market lost ground as many investors preferred to remain on sidelines amid concerns over a further hike in policy rate. On Monday, the index fell below the 40,000 mark.

Cautious investors refrained from building fresh positions on Tuesday as well and awaited the monetary policy announcement and the Supreme Court’s verdict on a Pakistan Tehreek-e-Insaf’s (PTI) petition challenging the postponement of elections in Punjab. The KSE-100 index ticked up on Wednesday on clarity after the monetary policy announcement where the central bank jacked up the policy rate by a lower-than-expected 100 basis points (bps).

Positivity returned to the bourse on Thursday as Saudi Arabia committed a financial support of $2 billion, which would help Pakistan secure the much-awaited deal with the International Monetary Fund (IMF). However, Finance Minister Ishaq Dar cancelled his trip to the United States, where he was supposed to meet the IMF and World Bank officials, which turned things around on Friday.

The news was not well received and resultantly the index came under pressure, dropping over 300 points. The KSE-100 index gained 49 points, or 0.12% week-on-week, and settled at 40,050 at the end of the week.

JS Global analyst Wasil Zaman, in his report, noted that the market remained stable week-on-week closing at 40,050 points despite a prolonged delay in the IMF programme.

There was some clarity on the political front as the Election Commission of Pakistan (ECP), following orders from the Supreme Court, announced the holding of elections in Punjab on May 14, he said.

Oil and gas sector (+1.2% week-on-week) emerged as the top performer following news of crude production cuts by OPEC+ countries.

Tobacco sector (-11.6% week-on-week), on the other hand, was among the key under-performers.

On the news front, with administrative controls on imports intact, the trade deficit continued to narrow and reached $1.46 billion in March, down 21% month-on-month. Imports declined 5% month-on-month whereas exports improved 8%.

In a bid to control inflation, the State Bank went for further monetary tightening, increasing its policy rate by another 100 bps to 21%. Its foreign currency reserves remained largely stable at $4.24 billion, a marginal decline of $36 million week-on-week.

Oil marketing companies’ sales continued to slide during March 2023, hitting 1.1 million tons, down 9% month-on-month, and cement sales for March showed a similar trend, declining to 3.8 million tons, down 6% month-on-month as a result of economic slowdown, the JS analyst added.

Arif Habib Limited, in its report, said that the market commenced trading on a negative note as participants expected an interest rate hike in the monetary policy.

Furthermore, noise on the political front fuelled the negative momentum. However, the market witnessed a rally after a lower-than-expected jump in policy rate (100bps hike).

Meanwhile, the commitment of funds worth $2 billion from Saudi Arabia gave a boost to the bullish sentiment as bridging the external financing gap was one of the conditions for completing the ninth review of IMF programme.

In terms of sectors, positive contribution to the market came from oil and gas exploration companies (149 points), technology and communication (90 points), power generation and distribution (45 points), fertiliser (41 points) and cement (32 points).

Negative contribution came from auto assemblers (22 points), tobacco (17 points) and commercial banks (14 points).

Foreigners’ buying continued during the week as they bought stocks worth $4.7 million as compared to net buying of $0.15 million last week, the AHL report added.

Published in The Express Tribune, April 9^th, 2023.

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