PSX cheers IMF loan, UAE investment

KARACHI:

Pakistan Stock Exchange (PSX) enjoyed a bullish week and ended at a record high just short of 76,000 points as investor interest was bolstered by several positive triggers including loan talks with the International Monetary Fund (IMF), pre-budget speculation and assurances of massive investments by the United Arab Emirates (UAE).

The market’s bull-run was also fueled by the rising foreign currency reserves that stood above $9 billion, stable inflows through the Roshan Digital Account (RDA) and rupee stability.

Similarly, the State Bank of Pakistan (SBP) reported a current account surplus for the third consecutive month in April 2024. Though investors resorted to profit-taking at high stock valuations, the bourse still maintained its record-breaking streak and closed with gains of nearly 650 points.

Day-by-day movement of the market showed that at the beginning of the week on Monday, the PSX snapped its rising streak and came under significant selling pressure owing to over-leveraged investor positions, futures contract rollover and pre-budget uncertainty.

Next day, despite enduring a lackluster session, stocks gained some ground, driven by speculation ahead of the announcement of federal budget for 2024-25 in the first week of June. On Wednesday, the KSE-100 index succumbed to late profit-taking and closed lower by 250 points primarily due to uncertainty caused by the potential austerity measures in the upcoming budget.

The following day, the market rebounded and crossed the 75,000 mark, buoyed by positive sentiment as investors anticipated an imminent reduction in policy rate and progress on resolving the circular debt crisis under a new IMF programme.

On Friday, the PSX continued its bullish trend and reached a new all-time high close to the 76,000 mark, fueled by assurances of $10 billion investment by the UAE and the IMF’s statement that Pakistan had made significant progress towards reaching a staff-level agreement.

The benchmark KSE-100 index added 641 points, or 0.85% week-on-week (WoW), and settled at 75,983.04 points. JS Global Deputy Head of Research Muhammad Waqas Ghani, in his report, wrote that the KSE-100 continued its uptrend during the outgoing week and closed at 76k.

The index has risen by 13.5k points, or 22%, so far in calendar year 2024 with banks, fertilizer and power sectors being the key contributors, he said. Average daily volumes during the week under review inched up 0.7% WoW to 558 million shares while average value dropped 18% to $65 million.

The deputy research head said that the stock market reacted positively to the prime minister’s meeting with UAE President Sheikh Mohamed bin Zayed in Abu Dhabi, who assured Pakistan of support and committed to investing $10 billion in various sectors.

Throughout the week, budget and IMF-related news continued to surface. “Pakistan’s upcoming federal budget for FY25, scheduled for June 7, sets the stage for what could be the country’s largest IMF programme ever,” the research analyst said.

In other news, the current account for April 2024 recorded a surplus for the third consecutive month, restricting 10MFY24 deficit to $202 million (-95% year-on-year – YoY) as $2.8 billion worth of remittances outweighed the trade and services deficit of $2 billion. According to the National Electric Power Regulatory Authority (Nepra), power generation fell 13.87% YoY to 8,639 gigawatt-hours (GWh) in April due to dull demand, the JS deputy research head added.

Arif Habib Limited (AHL), in its commentary, said that the stock market continued its bullish trend, closing the week at an all-time high of 75,983 points. “Market sentiment was driven by promising talks with the IMF,” it said.

Furthermore, the UAE agreed to invest $10 billion in Pakistan, which further bolstered the market. Also, Pakistan received gross inflows of $171 million in RDA in April 2024. In an auction, the government raised Rs96.88 billion through the sale of Pakistan Investment Bonds (PIBs) where the cut-off yield dropped five basis points to 14.29% for 10-year bonds, AHL said.

Sector-wise positive contributors were power generation and distribution (174 points), technology and communication (139 points), leather and tanneries (52 points), commercial banks (39 points) and investment banks (17 points).

During the week, foreign investors sold shares worth $12.08 million, AHL added.