Stocks dive over growing political turmoil
Pakistan Stock Exchange (PSX) lost ground in a tumultuous week as delay in resumption of International Monetary Fund (IMF) loan programme, worsening political scenario and ex-prime minister Imran Khan’s arrest aided the downward spiral.
The benchmark KSE-100 index remained in the red for most of the week and closed on a negative note. On Monday, the week commenced with a dip when bears took control of the market over growing political turbulence and persistent delay in reviving the IMF programme, which dragged the index below the 42,000 mark.
The following session brought no respite as political instability took its toll on the stock market, rattled by the arrest of former prime minister and Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan in Al-Qadir Trust case.
The stock sell-off persisted on Wednesday as well in the backdrop of political noise coupled with protests by PTI supporters in different cities. After three bearish sessions, investor confidence on Thursday got a boost from optimistic approach towards the IMF with expectation of release of the delayed loan tranche.
The bullish journey continued on Friday as well as investors awaited the Islamabad High Court (IHC)’s verdict in the Al-Qadir Trust case. Furthermore, the rupee’s smart recovery boosted investor confidence. The KSE-100 index lost 754 points, or 1.8% week-on-week (WoW), and settled at 41,488.
JS Global analyst Muhammad Waqas Ghani, in his report, noted that in a turnabout from the previous trend, the market closed negative in the outgoing week, losing 754 points over growing political temperature and delay in completion of IMF’s ninth review. “Investors chose to stay on sidelines as a result of former premier’s arrest and the subsequent nationwide violent protests,” he said.
Exploration and production (E&P) sector (down 6% WoW) and tech sector (down 3.5% WoW) were the key underperformers.
On the economic front, data showed a contraction in budget deficit to 1.7% of GDP during 3QFY23. In absolute terms, the deficit expanded 17% YoY.
Likewise, remittances’ data for 10MFY23 showed a 13% YoY decline. Pakistani rupee faced a steep devaluation on Wednesday and Thursday and lost 5% (Rs14), slumping to an all-time low of Rs298.93 to a dollar.
The currency then recovered to settle at 285.08 on Friday over expectations that the political climate would improve in the wake of Supreme Court’s ruling declaring Imran Khan’s detention as illegal.
SBP’s foreign currency reserves remained largely stable, declining by just $74 million to $4.4 billion, providing import cover of around one month, the JS analyst added.
Arif Habib Limited, in its report, said that the stock market commenced trading on a negative note on Monday as Fitch Ratings revealed that Pakistan was facing a substantial debt payment of $3.7 billion in the May-June period.
Additionally, Pakistan was not on the agenda of IMF meetings, which dampened hopes for the resumption of loan programme. Furthermore, the arrest of ex-PM Imran Khan sparked protests across the country, leading to political instability. However, as the week progressed, the political situation relatively eased.
In terms of sectors, positive contribution to the bourse came from tobacco (2.2 points) and modaraba (0.3 point).
Negative contribution came from oil and gas exploration companies (220 points), commercial banks (212 points), technology and communication (164 points), fertiliser (137 points) and cement (83 points).
In terms of stocks, positive contributors were Habib Metropolitan Bank (17 points), GlaxoSmithKline (6 points), Murree Brewery (4.6 points), Fauji Fertiliser Company (2.5 points) and Indus Motor (2.3 points). Negative contribution came from Systems Limited (110 points), Habib Bank (105 points), Oil and Gas Development Company (103 points), Pakistan Petroleum (76 points) and United Bank (69 points).
Foreigners turned net sellers who sold stocks of $1.1 million against net buying of $6.1 million last week, AHL added.
Published in The Express Tribune, May 14th, 2023.
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