Pakistan Stock Exchange (PSX) made gradual progress in the outgoing week as it added nearly 350 points to its tally, but could not cross the resistance level of 66,000.
The market remained volatile throughout the week with a mix of positive moves and profit-taking at higher stock valuations. At the beginning of the week, caution prevailed when market players awaited the announcement of monetary policy.
However, the staff-level agreement between Pakistan and the International Monetary Fund (IMF) following last review under the $3 billion standby arrangement (SBA) provided a boost to the bourse.
Similarly, the surplus in Pakistan’s current account balance and increase in the State Bank of Pakistan’s (SBP) foreign currency reserves were other major positives for the market.
On the other hand, foreign direct investment in the country slowed down during the first eight months of the current fiscal year, which deterred some investors from building their positions.
Day-to-day performance of the PSX shows that on Monday it experienced a modest recovery, fuelled by anticipation surrounding the SBP’s monetary policy announcement and optimism about the IMF’s final review under the SBA.
Next day, the KSE-100 index extended its gains and surged over 600 points following military strikes on terrorist hideouts and announcement of monetary policy where the SBP kept the policy rate unchanged.
On Wednesday, stocks continued their bull-run for the third successive day as the IMF and Islamabad reached a staff-level agreement under the $3 billion SBA.
The bourse gave up earlier gains following profit-taking on Thursday, snapping the three-day bullish streak. On the last trading day of the week, the PSX succumbed to selling pressure and extended losses by more than 250 points.
At close of the topsy-turvy week, the benchmark KSE-100 index gained 335 points, or 0.52% week-on-week (WoW), and settled at 65,151.83.
JS Global Deputy Head of Research Muhammad Waqas Ghani, in his report, stated that the market experienced volatility throughout the week, with the initial three sessions concluding positively before profit-taking dominated the final two sessions.
Read Profit-taking prevents PSX from crossing 66k
“The focal point during the week was the IMF’s conclusive assessment of the $3 billion SBA, marked by the signing of a staff-level agreement,” he said, adding that the newly elected government reaffirmed its commitment to meeting all the structural benchmarks and indicative targets set forth by the IMF. Another notable event was the SBP’s monetary policy statement, where it opted to maintain the policy rate at 22% for the fifth consecutive time, since July 2023. For the decision, the SBP cited the current high inflation rate and the inflation outlook leaning towards unfavourable risks, despite recent disinflationary trends.
According to Pakistan Bureau of Statistics (PBS), the large-scale manufacturing sector posted an increase of 1.8% year-on-year (YoY) in January 2024, making a positive growth for the second consecutive month.
Furthermore, in T-bills’ auction, cut-off yields jumped in the range of 20.9 to 21.7 basis points for papers of different maturities, the JS analyst added.
Arif Habib Limited (AHL) wrote, in its report, that the market remained mixed in the beginning since investors adopted a careful stance as they awaited the monetary policy announcement. Following the announcement of unchanged policy rate and signing of a staff-level agreement with the IMF, the market sentiment revived.
The current account recorded a surplus of $128 million in February 2024, compared to a deficit of $303 million in January. Additionally, the SBP’s foreign exchange reserves climbed up $105 million.
Foreign direct investment declined by 17% YoY in 8MFY24, reaching $821 million.
Foreign buying continued during the week under review, clocking in at $2 million compared to net buying of $2.7 million last week, AHL added.
Published in The Express Tribune, March 24th, 2024.
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