PSX remains range bound amid mixed signals

KSE-100 index loses 366 points, or 0.46% WoW, settles at 78,445

KARACHI:

Pakistan Stock Exchange (PSX) traded in a narrow band in the outgoing week as investors were worried about the budget measures being debated in the National Assembly, which drove the KSE-100 index down by over 350 points.

It came despite optimism over the impending approval of a new and larger International Monetary Fund (IMF) loan programme. It was an eventful week that marked the closure of fiscal year 2023-24 for the market, which provided the highest annual return in 21 years.

Other key events during the week were the State Bank of Pakistan’s (SBP) announcement of a $270 million current account deficit for May 2024 and favourable results in the T-bills’ auction, which hinted at a potential rate cut in the next monetary policy announcement.

In addition, the inclusion of stringent tax measures against exporters in the FY25 budget and initiatives for the privatisation of state-owned enterprises (SOEs), particularly Pakistan International Airlines (PIA), also impacted market dynamics.

Day-to-day movement of the bourse showed that it kicked off the week on a bearish note on Monday due to a high current account deficit and the imposition of hefty taxes on exporters, which wiped off nearly 580 points from the KSE-100 index.

On Tuesday, the market extended losses with a drop of 292 points amid consolidation of investor positions in overbought stocks. Next day, the bourse turned bullish, with the KSE-100 index snapping its two-day losing streak by surpassing the 78,000-point mark. Investor confidence was bolstered by expectations of budget approval and the government’s commitment to privatising the SOEs.

The positive momentum persisted on Thursday as well, driven by the robust performance of oil and banking stocks and a favourable T-bills’ auction, which indicated the possibility of a rate cut in the upcoming monetary policy. On Friday, however, the index ended the last session of FY24 on a bearish note.

The benchmark KSE-100 index closed the week at 78,445, down 366 points, or 0.46% week-on-week (WoW). JS Global Deputy Head of Research Muhammad Waqas Ghani wrote in his review that fiscal year 2024 concluded with the highest return in 21 years for the KSE-100 index.

However, the average daily traded volume recorded a 23% week-on-week decline in US dollars.

The week began with the release of SBP data, which showed that Pakistan’s current account, after remaining in surplus for three months, registered a deficit of $270 million in May 2024. It led to an increase in the 11-month (July-May) deficit to $464 million.

Although the May data reduced the possibility of achieving a current account surplus for the year, the possibility still remained in place, he said. Additionally, the SBP reported a decrease in foreign exchange reserves by $239 million to $8.9 billion.

Certain amendments to the proposed Finance Bill had been under discussion throughout the week. The uncertainty ended on the last trading day when the bill was approved with the amendments, the JS deputy research head added.

Arif Habib Limited (AHL), in its report, commented that the stock market remained range bound during the week as selling pressure emerged, although investors were optimistic about the new IMF loan programme.

Furthermore, the SBP raised Rs131 billion in the bonds’ auction and Rs776 billion in the T-bills’ auction, exceeding the target of Rs450 billion for the latter, it said. The outflow of profits and dividends surged 15.4 times year-on-year to $918 million in May 2024, marking the highest monthly repatriation on record. Moreover, the Pakistani rupee appreciated Rs0.17, or 0.06% WoW, reaching Rs278.3 against the US dollar.

During the week, foreign investors bought shares worth $2.5 million compared to net buying of $0.6 million in the previous week, AHL added.