Stocks hit 6-year high on strong earnings
Pakistan Stock Exchange (PSX) posted fresh gains of 2.5% in the outgoing week, which came on the back of encouraging corporate results, rupee strengthening and optimism about a reduction in the State Bank’s policy rate.
The easing of weekly inflation by 1.7% and the improvement in foreign exchange reserves by 0.88% provided support to the rising market. Moreover, the prevailing political calm ahead of elections early next year and the news of former premier Nawaz Sharif’s homecoming gave investors further confidence.
A key event of the week came when the benchmark KSE-100 index crossed the psychological barrier of 50,000 points, thanks to a robust buying spree.
At the beginning of the week, the bourse commenced trading on a positive note amid increase in trading activities as investors weighed the rupee recovery and the finance minister’s assertion about improving economic indicators.
However, the market lost momentum on Tuesday owing to late selling pressure linked to the weakening rupee and geopolitical tensions. The bearish trend continued on Wednesday as investors saw volatile trading amid global equity sell-off.
On Thursday, bulls took the driving seat as the market surged over 900 points and comfortably crossed the 50,000 barrier on expectations that the State Bank would slash its policy rate in the upcoming monetary policy committee meeting.
On the last day of trading week, the KSE-100 climbed nearly 367 points while carrying on the previous day’s bullish momentum because of encouraging corporate results and optimism about reduction in the policy rate. The market closed at 50,732 with an increase of 1,238 points, or 2.5% week-on-week (WoW).
JS Global analyst Muhammad Waqas Ghani, in his market review, wrote that the KSE-100 index crossed the psychological barrier of 50,000 during the week. Average volumes picked up 8% WoW to 405 million shares. He said that quarterly result announcements took centre stage where higher-than-expected earnings of Pakistan State Oil, Engro Fertilisers, Meezan Bank and Engro Polymer and Chemicals triggered stock-specific activity.
On the macro front, the State Bank’s reserves increased by $67 million to $7.7 billion. Large-scale manufacturing (LSM) growth turned positive after 14 months as the sector grew 3% year-on-year (YoY) in August 2023. Current account deficit fell to just $8 million in September, marking a 98% YoY decline, driven primarily by 19% drop in imports along with 2% rise in exports.
In addition, the cut-off yields of three, six and 12-month treasury bills fell by 30, 45 and 44 basis points, respectively, in the auction held during the week.
Banking sector deposits reflected 1% month-on-month (MoM) and 15% YoY growth in September while investments grew 3% MoM and 29% YoY. In other news, the government slashed petrol prices by Rs40 per litre and diesel prices by Rs15 per litre, the JS analyst said. Arif Habib Limited (AHL) reported that during the week the market crossed 50,000 points, a milestone achieved after six years.
“The market maintained its bullish trend as the economy gained traction, interest rates and inflation peaked out, currency became stronger and companies declared robust results,” it said.
Sector-wise positive contribution to the market came from commercial banks (290 points), fertiliser (174 points), power (159 points), cement (106 points) and exploration and production (98 points).
Foreigners’ buying was witnessed during the week under review, which came in at $2.3 million compared to net buying of $1.4 million last week.
Published in The Express Tribune, October 22nd, 2023.
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