Bourse remains depressed over border tensions
Pakistan Stock Exchange ended the week with significant losses of over 1,300 points as geopolitical tensions and political uncertainty prevailed that kept investors at bay.
Market players were deterred by several negative factors such as pre-poll uncertainty and Senate resolutions calling for the postponement of general elections.
In addition, slim large-scale manufacturing (LSM) growth of 1.59% year-on-year (YoY) in November 2023 and the decline in foreign currency reserves soured investors’ mood. Mideast conflict and the resultant hike in freight cost due to maritime trade disruption also took a toll on the bourse.
There were positives as well such as Pakistani rupee appreciation, the receipt of $706 million on completion of the first IMF review and rollover of $2 billion in deposits by the UAE, which came as a respite for the market.
At the beginning of the week on Monday, the market faced significant bearish pressure as it lost over 350 points owing to pre-election uncertainty and Senate proceedings for potential postponement of general elections next month.
Continuing its descend, the PSX moved further south on Tuesday as investors weighed the thin LSM growth of 1.59% YoY in November, weakening rupee and political uncertainty. Next day, bears proved their dominance in a tug of war with bulls as the KSE-100 index remained on a downward journey on the back of escalating geopolitical tensions and political uncertainty.
Bears extended their control on Thursday when the index fell over 350 points after Pakistan launched retaliatory strikes in Iranian border areas, escalating regional tensions. Shares at the PSX reversed trend on Friday because of significant buying interest initially but most of the gains were wiped off by the close of trading despite the easing of border tensions between Pakistan and Iran.
Read Thin gains at PSX as Pak-Iran tensions ease
Overall, the benchmark KSE-100 index lost 1,355 points, or 2.1% week-on-week (WoW), and settled at 63,282.
JS Global analyst Shagufta Irshad, in her review, said that geopolitical tensions between Pakistan and Iran kept the KSE-100 volatile during the outgoing week.
The index saw a 2.1% WoW correction with negative close for four consecutive days. Average volumes dropped 31% WoW to 389 million shares a day. On January 18, Pakistan conducted airstrikes on terrorist hideouts inside Iran in reaction to the missiles fired by Iranian jets within Pakistani borders a day ago. As tensions heightened, China expressed its readiness to mediate between the two nations.
On the domestic front, leading political parties initiated their election campaigns by holding public forums, she said.
On the macro front, the State Bank of Pakistan’s (SBP) reserves reached $8 billion, down 1.6% WoW. Moreover, the current account for December 2023 recorded a surplus of $397 million, reducing 1HFY24 deficit to $831 million. In addition, the government decided to reduce petrol prices by Rs8 per litre during the week.
In other news, Pak Suzuki Motor sponsors accepted the delisting price of Rs609 per share proposed by the PSX delisting committee compared the price of Rs406 proposed by the sponsors initially, the JS analyst added. Arif Habib Limited (AHL), in its report, noted that during the week the bourse remained depressed amid political uncertainty and tensions on the western border, which caused panic in the market.
In addition, the SBP reported inflows of $706 million on successful completion of the first IMF review. As a result, the forex reserves are anticipated to reach $8.9 billion next week.
Moreover, the UAE rolled over deposits of $2 billion for one more year, which were maturing in January 2024. Also, net foreign direct investment grew 35% YoY and settled at $863 million in 1HFY24.
During the week, Pakistan and Dubai signed an investment agreement valuing at $3 billion, which covered cooperation in railways, economic zones and infrastructure development, AHL said. Pakistani rupee closed at Rs280.36 against the US dollar with appreciation of Rs0.5, or 0.16% WoW.
During the week under review, foreign investors sold shares worth $1.19 million compared to net buying of $1.88 million last week, AHL added.
Published in The Express Tribune, January 21th, 2024.
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