The Pakistan Stock Exchange (PSX) experienced an impressive rally for the second consecutive week after Eid, earning the title of the “world’s best performing market” on a weekly basis, according to a report by Arif Habib Limited. The index surged by nearly 2,800 points, breaking through the 44,000-point mark, as investors capitalised on the unlocking of an agreement with the International Monetary Fund (IMF).
Monday witnessed a remarkable daily gain of over 2,400 points, driven by extensive buying following the long-awaited staff-level agreement between Pakistan and the IMF. However, bearish pressure prevailed on Tuesday due to institutional profit-taking, briefly impacting the market despite a major recovery after the IMF deal.
On Wednesday, the downtrend continued as concerns over liquidity risks and the rupee’s depreciation led investors to adopt a cautious approach, resulting in a flat closing note. However, the index returned to the green zone on Thursday, with investors anticipating a $3 billion loan approval from the IMF in its upcoming executive board meeting, sparking buying interest.
The last trading session remained positive as investors found support from Pakistan’s surging foreign currency reserves, despite the absence of major positive factors. As a result, the benchmark KSE-100 index surged by 2,755 points, settling at 44,207 for the post-Eid week.
JS Global, Analyst, Muhammad Waqas Ghani highlighted the enthusiasm of investors following the government’s agreement with the IMF, which fuelled market bullishness. The increased market activity on the first trading day led to a temporary one-hour trading suspension, implemented to curb excessive volatility.
Notable sector-wise performances during the week were observed in the refinery (17% WoW), technology (14% WoW), and engineering sectors (12% WoW). On the economic front, Moody’s issued a positive statement, expressing that Pakistan’s agreement with the IMF will support macroeconomic stability. The IMF Executive Board will likely have a meeting on July 12 to approve disbursement of $1.1 billion for Pakistan.
Looking at trade figures, the FY23 trade deficit narrowed significantly to $27.5 billion, reflecting a 43% YoY reduction. The market positively received news of the government disbursing Rs142 billion to over a hundred Independent Power Producers (IPPs) to settle their dues.
In other sectors, provisional data for Oil Marketing Companies (OMCs) showed sales of 16.6 million tons in FY23, indicating a YoY decline of 26%. Similarly, the cement sector witnessed a 16% YoY decline in dispatches, totalling 44.6 million tons due to the overall economic slowdown.
Moreover, the State Bank of Pakistan’s reserves increased by $393 million WoW, reaching $4.5 billion as of June 30th, 2023. The market closed at 44,207 points, surging by 2,755 points and maintaining its position as the world’s best performing market, with a weekly USD-based return of 9.75% (PKR-based 6.6%).
Foreign investors demonstrated increased buying activity during the week, amounting to $4.7 million compared to a net buy of $1.3 million the previous week. Major buying was observed in the banking sector ($3.8 million) and the technology & communications sector ($1.7 million). On the local front, selling was reported by banks/DFIs ($5.5 million) followed by companies ($2.9 million).
The average trading volumes reached 340 million shares, a 47% WoW increase, while the average value traded settled at $41 million, reflecting a 63% WoW rise.
Published in The Express Tribune, July 9th, 2023.
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