Post-election turmoil takes toll on PSX

KSE-100 index losses 3,071 points, or -4.9% WoW, to close at 59,872.96

KARACHI:

At the beginning of the week, political uncertainty deepened with no clear majority for any political party in general elections, leading investors to resort to panic selling to avoid hefty losses, plunging the bourse.

The next day, stocks showed signs of recovery as Morgan Stanley Capital International announced the addition of 19 companies to its MSCI frontier small-cap index in the Quarterly Index Review. On Wednesday, the Pakistan Stock Exchange (PSX) continued its winning streak in a spectacular rally, with the index climbing impressively over 900 points as investors were optimistic about the prospect of setting up a coalition government.

The following day, however, the changing political scenario dragged down the index nearly 2% to around 61,000 points as the race among different political parties for forming a new government discouraged investors. On Friday, the PSX plummeted nearly 2% to above 59,000 points amid intense political turmoil following the emergence of a new version of the story about former Premier Imran Khan’s ouster by a no-confidence motion in April 2022. Besides, mainstream political players’ failure to reach a coalition arrangement necessary to form a new government dented investor sentiment.

Overall, the market collapsed by 3,071 points, or -4.9% WoW, to close at 59,872.96 points. JS Global analyst Shagufta Irshad, in her review, observed that the KSE-100 remained volatile throughout the week, closing with a 5% week-on-week (WoW) decline. Average traded volumes increased 14% WoW to 350 million shares/day, with a 4% decline in terms of US dollar value at the PSX. So far, KSE-100 has lost 4,271 points, or ~7%, since the general elections held on 8th February due to a lack of clarity over the upcoming setup of the new government.

“Dialogues among leaders of pivotal political parties centred on the establishment of a new government and putting forth candidates for crucial positions, was the talk of the town during the week,” she said. Political news flow overshadowed the strong corporate earnings and dividend announcements that came during the week.

Among the key news were OGRA formally notifying the first semi-annual gas price hike with a major increase witnessed in protected residential consumers (40-60% hike across various slabs) and the fertiliser sector (175% rise in feedstock gas prices). The government also notified a Rs2.7/8.4 per litre increase in petrol and diesel prices. Moreover, PBS reported 3.4% YoY growth in LSM figures for the month of Dec-23. On the macro front, the SBP reported a 0.3% WoW increase in FX reserves maintaining at $8 billion level for the past 3 months.

Read PSX plunges 3.68% after 'election upset'

The SBP also conducted PIB auction during the week, where cut-off yields remained stable at 16.8%, 15.5%, 14.5%, for three, five, and 10-year papers, the JS analyst added.

“Furthermore, the caretaker federal cabinet approved a 12.3% weighted average hike in gas prices. In December 2023, Large Scale Manufacturing Industries (LSMI) output rose by 3.4% YoY. Also, there was a rise in the prices of petroleum products by PKR 2.73 of motor spirit (MS) and PKR 8.37 of High-Speed Diesel (HSD),” Arif Habib Limited (AHL) reported.

Along with this, remittances surged by 26% YoY to $2.4 billion during January 2024. The SBP’s reserves inched up by $12 million to $8.1 billion. The rupee closed at 279.36 against the US dollar, weakening by Rs0.08, or 0.03% WoW. Overall, the market closed at 59,872.96 points, declining by 3,071 points, or -4.9% WoW.

Sector-wise negative contributors were Oil and Gas Exploration Companies (1,176 points), Cement (288 points), Power Generation and Distribution (287 points), Oil and Gas Marketing Companies (216 points), and Commercial Banks (206 points). A remarkable healthy contributor was Textile Spinning (3 points).

During the week, foreign buying clocked in at $5.2 million compared to net buying of $5.7 million last week. Major buying was witnessed in exploration and production firms ($2.2 million) and all other sectors ($1.2 million).

Published in The Express Tribune, February 18^th, 2024.

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