With political calm, PSX advances modestly

KSE-100 index rises 468 points, or 0.7% WoW, settles at 65,794

KARACHI:

Pakistan Stock Exchange (PSX) advanced somewhat and gained over 450 points during the outgoing week as political concerns eased following the formation of a new government and optimism grew about seeking a new, larger loan package from the International Monetary Fund (IMF).

With political clarity, Pakistan’s bonds rallied in the international market and also inflation came down to 23.1% in February from 28.3% a month ago. Those positive factors provided the required trigger to the stock market. However, weak data indicating a 19% year-on-year (YoY) decline in cement sales and an 8% decrease in oil consumption deterred investors.

In addition, the investors took a cautious stance due to uncertainty about economic recovery ahead of the monetary policy announcement in mid-March.

At the beginning of the week on Monday, the bourse marched north when investors took cue from the election of a new prime minister and the upbeat economic data.

Next day, stocks faced pressure from economic headwinds and lost over 200 points as market players were worried about the future course of the economy. On Wednesday too, the KSE-100 index remained under selling pressure because of doubts about potential negotiations with the IMF for a new loan programme of $6-8 billion.

The following day, stocks endured highly volatile trading and closed slightly lower owing to fears about economic recovery and the cautious stance ahead of monetary policy announcement. The index modestly rose by nearly 200 points on Friday where investors cheered the IMF’s willingness to negotiate a new programme to help Pakistan address its economic woes.

Overall, the benchmark KSE-100 index rose 468 points, or 0.7% week-on-week (WoW), and settled at 65,793.76.

JS Research analyst Muhammad Waqas Ghani, in his report, stated that the market gained ground and average traded volumes went up 1.6% during the week.

He said the bourse reacted positively to the settling of dust on the political front after Shehbaz Sharif was elected the prime minister for a second time. He gave the directive to immediately engage with the IMF for getting an Extended Fund Facility (EFF).

Names of new cabinet members were being finalised whereas the election for the country’s president was scheduled for March 9, to be followed by Senate elections later in the month.

Besides, Pakistan’s international bonds rallied on Monday on the back of clarity on the political front following weeks of uncertainty due to a hung parliament.

On the economic front, the pace of inflation measured by the Consumer Price Index (CPI) slowed down to 23.1% in February, the lowest since July 2022 owing to a high base.

He pointed out that the YoY pace of Wholesale Price Index (WPI) eased to 18.7%, a 30-month low, while core inflation recorded a similar trend where urban and rural core inflation decreased to 15.5% (13-month low) and 21.9% (12-month low), respectively. On the back of lower inflation, the Karachi Inter-bank Offered Rate (Kibor) showed a continuous downward trend. Six-month Kibor dropped 37 basis points since close last Friday.

Meanwhile, Moody’s upgraded Pakistan’s banking sector outlook from negative to stable, the JS analyst added.

Arif Habib Limited (AHL) wrote that the market continued its bullish momentum during the week amid revival of investors’ confidence on the back of formation of the new government. On the economic front, the government raised Rs527 billion through the auction of Market Treasury Bills.

Furthermore, textile exports climbed 20% YoY in February 2024, reaching $1.4 billion, while remittances increased 18% YoY to $2.25 billion. In addition, the State Bank of Pakistan’s (SBP) reserves fell $54 million to $7.9 billion. Pakistani rupee closed at 279.04 against the US dollar, appreciating Rs0.15, or 0.05% WoW.

Sectors making positive contribution to the market were oil and gas exploration (217 points), refinery (105 points), fertiliser (76 points), power generation and distribution (61 points) and cement (61 points).

Foreign buying continued during the week under review, which came in at $6.3 million compared to net buying of $10.4 million last week, AHL added.

Published in The Express Tribune, March 10^th, 2024.

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