Stocks edge up as momentum slows down

KSE-100 index adds 123 points, or 0.2% WoW, settles at 64,638

KARACHI:

Pakistan Stock Exchange ended the week on a slightly positive note as the pace of its robust rally slowed down in range-bound trading amid a volatile political climate that deterred investors and cast a shadow over economic prospects.

The central bank’s report showing a $66 million decrease in its foreign currency reserves and a 1.36% week-on-week increase in inflation measured by the Sensitive Price Indicator (SPI) also dented investor sentiment. In a key development, however, the International Monetary Fund (IMF) gave its nod for the release of a $700 million loan tranche, which was expected to provide a fresh impetus to Pakistan’s economy.

Other significant positive factors influencing the market included a 5% month-on-month (MoM) rise in workers’ remittances and a fall in government bond yields in the latest auction.

On Monday, the week opened with a modest fall of over 250 points amid ongoing political uncertainty ahead of general elections early next month.

Next day, despite a substantial drop, the PSX stayed above the 64,000 mark in volatile trading where the KSE-100 index swung in a 908-point range.

On Wednesday, the bourse extended its losing streak as it succumbed to profit-taking, ending the day slightly below 64,000 with a loss of 250 points. The following day, bulls took over control, pushing the stock exchange above the 64,500 mark following gains of nearly 700 points. The market got a boost from investor enthusiasm in the wake of a drop in yields on government papers in the latest auction and ahead of the IMF executive board meeting.

The KSE-100 index closed flat on Friday with the addition of just 20 points as it failed to protect early gains driven by the IMF’s nod for the release of a $700 million loan tranche. Overall, the benchmark KSE-100 index recorded an increase of only 123 points, or 0.2% week-on-week (WoW), and settled at 64,638.

JS Global analyst Shagufta Irshad, in her review, said that the KSE-100 index gained 0.2% WoW but average traded volumes dropped 19% to 560 million shares and average traded value declined 18% in terms of US dollar. Among sector-wise developments, the exploration and production (E&P) sector reported a 3.5% year-on-year (YoY) increase in oil production and 3.5% decline in gas production for December 2023.

Read PSX closes flat over late profit-taking

In the auto sector, sales of the three large assemblers went down 67% YoY while tractor sales grew more than 100% in December, she said.

During the week, the Privatisation Commission (PC) board approved the transaction structure for selling a minimum 51% stake in Pakistan International Airlines (PIA), which put PIA in the limelight.

In other news, the potential sale of Pakistan’s stake in Reko Diq was brought forward at the Riyadh Minerals Forum and a reduction in power tariff to 9 cents per unit was approved for the textile sector. Mari Petroleum discovered oil and gas reserves in K-P, which triggered activity in its stock. Most importantly, the IMF board approved a second tranche of $700 million for Pakistan. The State Bank’s reserves remained stable at $8.2 billion while workers’ remittances rose 5% MoM to $2.38 billion in December, the JS analyst added.

Arif Habib Limited (AHL), in its report, noted that the stock market remained range bound throughout the week. Positive economic developments included the approval of the second loan tranche of $700 million by the IMF executive board, which was expected to result in economic stabilisation.

Furthermore, remittances reached $2.4 billion in December 2023, reflecting a substantial 13% YoY and 5% MoM increase. There was a notable decline in cut-off yields on three, five and 10-year Pakistan Investment Bonds (PIBs), respectively, AHL said.

In addition, Pakistani rupee closed at Rs280.36 against the US dollar, appreciating by Rs1.04, or 0.37% WoW.

Sector-wise, positive contribution came from oil and gas exploration companies (242 points), fertiliser (214 points), automobile assemblers (56 points), miscellaneous (38 points) and engineering (9 points).

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

Published in The Express Tribune, January 14^th, 2024.

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