Stocks register highest gains since 2017

KSE-100 index rises 1,509 points, settles at 48,586

KARACHI:

Stocks performed remarkably during the outgoing week as bulls made an energetic comeback at the Pakistan Stock Exchange (PSX) which jumped 3.2%, marking over six-year high week-on-week increase. A weekly rally of a similar extent was last witnessed in June 2017.

The benchmark KSE-100 index hit an almost two-year high due to rumours concerning the status quo in monetary policy announcement and expectations of a significant Saudi Arabian investment. In the rally on Monday, the bourse surpassed the 48,000-point mark.

Tuesday brought more gains in the extended positive trend as the State Bank of Pakistan (SBP) left its tight monetary policy unchanged as expected by investors coupled with a lower inflation outlook.

The rally continued on Wednesday, triggered by the announcement of a fall in the Consumer Price Index (CPI) for July 2023, which came in at 28.3% year-on-year (YoY) as compared to 29.4% in June 2023. Investors also made fresh investment in the PSX over the unchanged policy rate.

The following two sessions witnessed losses as bears took charge following a plunge in the international crude oil prices. Dismal data on oil and DAP fertiliser sales for July 2023 dented investor confidence, leading to a bearish close of the market on Thursday after three spirited trading sessions.

On Friday, the bearish spell was led by a poor economic outlook, which pushed the market down marginally. The KSE-100 index gained 1,509 points, or 3.2%, compared to the previous week, settling at 48,586.

According to JS Global analyst Muhammad Waqas Ghani, investors began the week with robust optimism, taking KSE-100 to a six-year high at 48,765. The bourse, however, succumbed to bearish pressure in the latter part of the week.

On the economic front, the SBP maintained its policy rate at 22% in the monetary policy committee meeting held on Monday due to a declining inflation, with FY24 CPI projected at 20-22%. “The market had anticipated a hike based on a recent IMF report, which recommended the tightening of monetary policy measures,” he said.

On the other hand, inflation for July 2023 clocked in at 28.3%, higher than street estimates of 26%, driven by food and electricity prices. During the week, the Senate passed a law to establish the Pakistan Sovereign Wealth Fund, where the government would park its assets. The government also announced a significant increase of Rs20 per litre in prices of petrol and diesel.

July 2023 data showed that oil marketing companies’ (OMCs) volumes declined 6% year-on-year (YoY) owing to considerably lower auto sales coupled with thin demand from the power sector. Moreover, cement despatches declined 21% month-on-month (MoM) in July, the JS analyst added.

Arif Habib Limited, in its report, said that the stock market commenced trading on a positive note, continuing the moment from last week.

Bulls charged after the SBP kept the policy rate unchanged at 22%. On Wednesday, the bourse reached a six-year high, crossing 49,000 in intra-day trading. Pakistani rupee closed at 286.97 against the greenback, depreciating by Rs0.52, or 0.18%.

The market closed at 48,586, up 1,509 points, or 3.2% WoW, posting a positive return for the sixth consecutive week.

In terms of sectors, positive contribution came from E&P (435 points), banks (418 points), cement (139 points) and automobile assemblers (132 points).

Foreigners turned net buyers during the week, who bought shares worth $5.3 million as compared to net buying of $2.8 million last week, the AHL report added.

Published in The Express Tribune, August 6^th, 2023.

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