PSX sees record highs amid privatisation talks

The Pakistan Stock Exchange (PSX) experienced a tumultuous week, characterised by fluctuations, commencing at a record high and concluding at a new peak, driven by discussions on SOE privatisation and robust remittances.

The week commenced positively, with bullish optimism propelling the index to a new all-time high at 72,764, fuelled by rising investor confidence stemming from lower inflation and government discussions regarding the privatisation of struggling state-owned enterprises (SOEs). However, investor interest waned on Tuesday due to the upcoming budget and talks of the International Monetary Fund (IMF) proposing more taxes under a new loan programme.

Profit-booking at high valuations and pre-budget worries led to bearish sentiment, prompting a drop of over 150 points on Wednesday, keeping the market in the red. The KSE-100 index inched up on Thursday, bolstered by a major pharmaceutical partnership and news of the World Bank’s new strategy for Pakistan, which fuelled hope among market players. The market soared above 73,000, hitting an all-time high on the last trading session, triggered by a 28% year-on-year (YoY) rise in remittances and foreign reserves reaching $9.12 billion, providing investors with much-needed relief.

Despite experiencing dips in between, the market closed the week in the green, gaining over 1,200 points and nearing the 73,000 mark. Overall, the benchmark KSE-100 index surged 1,183 points, or 1.65% week-on-week (WoW), closing at 73,085.50.

Topline, in its weekly review, highlighted that the KSE-100 index gained 1.65% on a WoW basis. This positivity in the market can be attributed to news that following the arrival of a key Saudi delegation, Saudi Crown Prince Muhammad Bin Salman is expected to arrive within days to seal investment deals.

Government efforts to boost trade ties and investment, along with a focus on streamlining the privatisation process of SOEs, further bolstered investor confidence. Delegations from Saudi Arabia and Qatar met with Pakistani government officials this week to enhance trade ties and investment in Pakistan. The government continued to aim at improving the process-time for the privatisation of SOEs. In this regard, the Privatisation Division (PD) chalked down a strategy for the next 5-year privatisation programme. PD also sought cabinet approval to transfer 322 million shares of Oil & Gas Development Company to the Pak Sovereign Wealth Fund.

Investor confidence was further boosted by the final disbursement of $1.1 billion by the IMF. Additionally, SBP foreign exchange reserves crossed $9 billion, taking import cover to a 27-month high.

Remittances for April 2024 were up 28% YoY to $2.8 billion, taking the 10MFY24 figure to $23.8 billion (+3% YoY). Fiscal accounts indicated a slippage in 3QFY24, with the budget deficit clocking in at 1.4% of GDP (9MFY24: 3.7% of GDP), and more importantly, the primary balance reporting a deficit of 0.2% of GDP, dragging the 9MFY24 primary surplus to 1.5%, the JS analyst added.

Arif Habib Limited (AHL), in its report, stated that market sentiment remained robust, leading the index to close the week at the highest-ever level of 73,086 points. On the economic front, headline inflation in April 2024 stood at 17.3%, compared to 20.7% in the same period last year, potentially paving the way for a cut in the policy rate in the upcoming MPC meeting.

The rupee showcased a marginal appreciation of Rs0.09 by 0.03% WoW, reaching 278.12 against the greenback. On a weekly basis, the index gained 1,183 points (1.65%), closing at 73,086 points.

Sector-wise, positive contributors to the index included pharmaceuticals (272 points), power (164 points), technology (123 points), leather and tanneries (115 points), and cable and electrical goods (56 points). Meanwhile, sectors that made negative contributions were E&Ps (132 points) and OMCs (25 points).

Positive contributions came from Dawood Hercules Corporation (146 points), Service Industries (115 points), Kot Addu Power Company (70 points), GlaxoSmithKline Pakistan (67 points), and Highnoon Laboratories (63 points). Negative contributions were observed from Engro Fertilizers (122 points), Oil & Gas Development Company (59 points), Meezan Bank (48 points), Mari Petroleum Company (40 points), and Pakistan Petroleum (39 points).

Foreign investors bought shares worth $2.7 million during the week under review, compared to net buying of $8 million in the previous week.

Published in The Express Tribune, May 12^th, 2024.

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