Stocks remain volatile in shortened week

Benchmark KSE-100 index drops 206 points, settles at 48,218.49

KARACHI:

Pakistan Stock Exchange (PSX) experienced choppy trading in a four-day week as the benchmark KSE-100 index moved on both sides of the fence in response to a number of developments on the political and economic fronts.

The week commenced on a positive note on Tuesday after a long weekend and the market jumped over buying of selected stocks that had dropped to attractive valuations but it still shied away from the 49,000-point mark.

The bourse reversed direction on Wednesday and posted a steep loss due to the sinking rupee and projected rise in inflation as a result of a massive increase in petroleum product prices to record highs by the caretaker administration.

The market rose slightly on Thursday, driven by energy stocks and late-session buying, despite concerns about inflation and rupee depreciation.

Investors’ interest weakened once again on Friday as the rupee’s slide and dismal current account statistics that showed a deficit of $809 million dented market confidence. The index concluded the session on a negative note and stood almost at levels where it had started off.

The benchmark KSE-100 index dropped by 206 points, or 0.4%, compared to the previous week, settling at 48,218.49. According to JS Global analyst Muhammad Waqas Ghani, the week commenced on a positive tone, yet volatility persisted.

Among major news, rumours and speculations were put to rest as Senator Anwaarul Haq Kakar took oath as the caretaker prime minister. His interim cabinet was also announced immediately.

On the economic front, the large-scale manufacturing (LSM) output dived 10.3% year-on-year (YoY) in FY23 owing to volatile economic and political conditions.

During the week, the rupee-dollar inter-bank rate slipped by 2.5%. A widening gap between the open market and inter-bank rates, now at 2.7%, underscores the increased importance of following the IMF’s recommendation of a maximum difference of 1.25%. The incoming government announced a hike of Rs17.5 per lite for petrol and Rs20 per litre for high-speed diesel during the week. “The depreciating rupee and the rising petroleum prices are beginning to alter the shape of inflation expectations,” he said.

In other news, fiscal deficit came in at Rs6.5 trillion (7.7% of GDP) for FY23, which was 71% higher than the initial budget estimate and 10% higher than the revised figure. Furthermore, after reporting a surplus for four successive months, Pakistan recorded a current account deficit of $809 million in July, the JS analyst added.

Arif Habib Limited, in its report, said that in the outgoing week, the market remained range bound due to various developments on the political and economic fronts. Notably, there was a transition in governance as a caretaker setup assumed control.

Additionally, the market sentiment was adversely affected by a significant increase in petrol and diesel prices, amounting to Rs17.5 and Rs20 per litre respectively.

On the economic front, the central government’s debt increased to Rs60.8 trillion as of June 2023 (+3.3% month-on-month). Furthermore, the State Bank’s reserves rose by $12 million to $8.1 billion.

The rupee depreciated against the US dollar during the week, closing at Rs295.78 with a loss of Rs7.29, or 2.46% week-on-week.

In terms of sectors, positive contribution to the market came from technology (194 points) and textile composite (20 points). Negative contribution came from commercial banks (159 points), fertiliser (122 points), cement (63 points), chemicals (38 points) and E&P (37 points).

In terms of stocks, positive contributors were Systems Limited (194 points), Pakistan Petroleum (62 points), Nestle Pakistan (28 points), Thal Limited (17 points) and Interloop Limited (17 points).

Foreigners were once again net buyers who bought shares worth $2.38 million during the week as compared to net buying of $2.92 million last week, the AHL report added.

Published in The Express Tribune, August 20^th, 2023.

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