Despite volatility, PSX achieves high growth

KSE-100 index rises 2,064 points, or 3.3% WoW, settles at 64,514.90

KARACHI:

Pakistan’s stocks started 2024 on an upbeat note and showed considerable resilience as they added over 2,000 points despite worries about political developments ahead of general elections in early February.

A substantial increase in the Federal Board of Revenue’s (FBR) tax collection, continuous growth in the State Bank of Pakistan’s (SBP) foreign currency reserves, substantial fall in the country’s trade deficit and a stable rupee provided critical support to the stock market.

During the week, investors rebalanced their portfolios and also resorted to profit-taking. On the first trading day of the new calendar year, Pakistan Stock Exchange (PSX) enjoyed a remarkable rally of over 2,200 points, propelled by investor enthusiasm about the Special Investment Facilitation Council (SIFC) initiatives, coupled with anticipation of economic reforms by the incoming government.

Next day, the KSE-100 index experienced a downturn primarily owing to dismal data revealing that the Consumer Price Index (CPI) surged to 29.7% year-on-year (YoY) in December 2023.

On Wednesday, despite facing a mixed trend, the index gained 297 points on reports of 22% YoY surge in exports to $2.81 billion, which pushed trade deficit 40% lower at $1.7 billion. The bourse closed flat on Thursday in the absence of positive triggers that significantly impacted investor interest in building their positions.

A wave of uncertainty engulfed the market on Friday, triggered by unexpected political shifts. The index recorded significant fluctuations as news surfaced that the Senate had approved a resolution seeking delay in general elections. The index recorded a decrease of 124 points.

Overall, the benchmark KSE-100 index gained 2,064 points, or 3.3% week-on-week (WoW), and settled at 64,514.90.

JS Global analyst Shagufta Irshad, in her review, said that the KSE-100 exhibited continued volatility while entering the new year where it saw a mix of profit-taking and rebalancing of portfolios.

Average daily traded volumes increased by 5% while traded value in US dollar terms rose by 12%. “Upcoming elections remained a central focus, with political news dominating headlines,” she said.

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Key developments included cases involving a potential lifetime ban on members of parliament, Pakistan Tehreek-e-Insaf’s (PTI) commitment to participating in elections regardless of cases against its founder and assurances from institutions about timely elections. On the macroeconomic front, the SBP’s forex reserves crossed $8.2 billion. CPI reading stood at 29.7% for December 2023 whereas tax collection for 1HFY24 remained above target at Rs4.47 trillion.

Besides, the government decided to keep petroleum product prices unchanged for the current fortnight. In other news, exports rebounded to a 19-month high, recording 22% YoY growth at $2.8 billion for December. Cement sales also took a positive turn with 5% YoY growth, the JS analyst added.

Arif Habib Limited, in its report, noted that in the first week of the new year, the stock market displayed notable resilience, experiencing a surge of 2,211 points on Monday – the second-highest point increase.

Moreover, positive economic indicators were evident as the FBR made a historic one-month tax collection of Rs984 billion, coupled with a substantial 40% YoY reduction in trade deficit for December.

However, the elevated headline inflation at 29.7% raised some investor concerns. On a positive note, the SBP’s reserves reached $8.2 billion, the highest level since July 14, 2023. Moreover, the rupee strengthened Rs0.46, or 0.16%, clocking in at Rs281.4/$.

Sector-wise, positive contribution came from oil and gas exploration companies (587 points), commercial banks (392 points), fertiliser (315 points), cement (185 points) and power generation and distribution (166 points).

Stock-wise, positive contributors were Pakistan Petroleum (268 points), Oil and Gas Development Company (258 points), Fauji Fertiliser Co (151 points), Hub Power (120 points) and United Bank (102 points).

During the week under review, foreign investors sold shares valuing at $3.1 million compared to net selling of $1.9 million last week.

Published in The Express Tribune, January 7^th, 2024.

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