Election fever influences trading at PSX

KSE-100 index loses 59 points, or 0.09% WoW, closes at 62,943.75

KARACHI:

Pakistan’s stock market traded in a narrow band in a shortened week where investor interest was driven by both hope and uncertainty about general elections, resulting in the KSE-100 index losing some ground by the end of the week.

Among other factors influencing market’s behaviour was the T-bills auction during which the government borrowed significantly less than the targeted amount but their yields came down. Also, the State Bank’s foreign exchange reserves fell $173 million while the Pakistani rupee remained largely stable.

At the beginning of the week on Tuesday, after a day’s closure on account of Kashmir Solidarity Day, the index experienced a notable surge in an earnings season rally, fuelled by expectations of approval of proposals by the International Monetary Fund (IMF) to resolve the circular debt crisis and address power tariff concerns. Investor optimism grew over S&P Global’s hint at a potential ratings upgrade for Pakistan, depending on collaboration with financial institutions for securing a new IMF deal.

The bourse succeeded on Wednesday in maintaining its positive momentum as investors appeared optimistic about the economic and political scenario after general elections. However, the index faced increased volatility despite expectations of ratings upgrade post-elections on the back of a new economic roadmap.

Following Thursday’s closure for general elections, the stock market was rattled on Friday by the delay in poll results and growing political uncertainty, which led to a plunge of 1,200 points and deterred investors from building their portfolios.

Overall, the benchmark KSE-100 index fell just 59 points, or 0.09% week-on-week (WoW), at 62,943.75.

JS Global analyst Shagufta Irshad, in her review, noted that average traded volumes dropped 2% WoW to 306 million shares at the Pakistan Stock Exchange (PSX) while traded value increased 22% in dollar terms.

“The benchmark index opened with a decline of over 2,000 points on Friday, being the first trading session post-elections, over lack of clarity about the potential political landscape,” she said. However, the market recovered 2% of the loss by the end of the session as more official results were announced by the Election Commission.

Read PSX plunges 3.68% after 'election upset'

In other news, S&P hinted at upgrading Pakistan’s sovereign rating to “B” from “CCC+” once political stability emerged after elections. On the macro front, in T-bills auction during the week, the cut-off yields decreased 32, 76 and 70 basis points for three, six and 12-month papers.

Meanwhile, Pakistan Bureau of Statistics announced that trade deficit narrowed 33% year-on-year for 7MFY24 with the tally reaching $13.2 billion. In other news, the government sought approval of the IMF for the settlement of Rs1.2 trillion in circular debt and a cabinet committee approved the restructuring of Pakistan International Airlines (PIA) for its privatisation, the JS analyst added. Arif Habib Limited (AHL) reported that in a three-day week, the PSX exhibited range-bound behaviour.

“Market sentiment was predominantly influenced by election-related developments. On the last day of the week, the market showed signs of pressure due to delay in announcement of polling results, sparking uncertainty among investors,” it said.

In Tuesday’s T-bills auction, the State Bank raised Rs64 billion against the target of Rs480 billion. Its forex reserves saw a trimming of $172 million to $8.04 billion. The rupee closed at Rs279.28 against the US dollar, strengthening Rs0.13, or 0.05% WoW.

Sector-wise negative contribution came from fertiliser (60 points), technology and communication (45 points), food and personal care products (24 points), oil and gas marketing companies (15 points) and textile composite (14 points). Positive contributors were power generation and distribution (54 points), miscellaneous (40 points), commercial banks (21 points), and oil and gas exploration companies (15 points).

Foreign buying was witnessed during the week, which came in at $5.7 million compared to net selling of $9.7 million last week, AHL added.

Published in The Express Tribune, February 11^th, 2024.

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