PSX remains volatile amid thin losses

KARACHI:

Pakistan Stock Exchange (PSX) experienced volatility in the outgoing week as it oscillated between red and green zones and closed with a slight fall of nearly 270 points.

The market’s fluctuation was largely influenced by investor worries over harsh taxation measures, including the potential imposition of up to 45% tax on agriculture, ahead of a new International Monetary Fund (IMF) loan programme.

However, there were some positive indicators as well such as a 44.4% year-on-year (YoY) increase in workers’ remittances that reached $3.2 billion in June 2024. In addition, Pakistan’s foreign exchange reserves increased $16 million to $9.405 billion.

Pakistani rupee remained stable while the State Bank of Pakistan (SBP) held T-bills and bond auctions where yields came down for treasury bills.

Day-to-day movement of the market showed that the KSE-100 index kicked off the week on a strong note, gaining over 350 points amid corporate earnings season and increasing investor interest, despite a fire incident at the bourse.

Next day, it posted modest gains over speculation about corporate earnings, which sparked interest in selected oil and banking stocks on expectations of high payouts.

The bourse came under bearish pressure on Wednesday as it lost over 800 points and closed below the 80,000 mark, dragged down by profit-taking at higher valuations.

The following day, stocks endured a lacklustre trading session in the absence of major positive triggers, though the index managed to close in the green with the addition of around 150 points.

PSX came under heavy selling pressure on Friday amid political uncertainty following court’s ruling, which declared that the Pakistan Tehreek-e-Insaf (PTI) was entitled for reserved seats in the assembly.

The benchmark KSE-100 index closed the week at 79,944, with a meagre loss of 269 points, or 0.33% week-on-week (WoW).

JS Global analyst Shagufta Irshad, in her report, wrote that the KSE-100 remained volatile throughout the week.

Subsequent to the Supreme Court’s ruling on reserved seats, the representation of the present government and its coalition partners in the National Assembly decreased from 68% to 62%, she said.

Average daily volumes registered a 0.3% WoW decline while average traded value rose 14% in terms of US dollars.

Cut-off yields in the recent T-bills auction fell 10 basis points (bps) and 18 bps for three-month and six-month maturities, respectively, while cut-off yields remained unchanged in the Pakistan Investment Bonds (PIB) auction.

Workers’ remittances remained above $3 billion for the second consecutive month in June 2024, marking a 44% YoY increase. Additionally, the SBP’s foreign exchange reserves reached a two-year high of $9.4 billion, she said.

According to media reports, the government expressed optimism about negotiations with the IMF for a fresh Extended Fund Facility and anticipated that an agreement would be reached by the end of the month, the JS analyst added.

Arif Habib Limited (AHL), in its report, observed that the stock market commenced the week on a positive note, continuing the momentum from the last fiscal year. Stocks closed at the highest-ever level of 80,672 points, after touching 81,087, on Tuesday.

However, correction was witnessed the following day as new IMF conditions surfaced such as the abolition of Pakistan Sovereign Wealth Fund and imposition of 45% tax on agricultural income.

Meanwhile, the SBP raised Rs82 billion and Rs442 billion through the PIB and T-bills’ auction, respectively, where three-month and six-month T-bill yields declined.

During the week, Pakistani currency remained stable at Rs278.40 against the greenback.

Sector-wise, the notable negative contributors were exploration and production (154 points), commercial banks (136 points), auto assemblers (61 points), power (48 points) and oil marketing companies (34 points).

Conversely, the sectors that mainly contributed positively were fertiliser (106 points), food and personal care products (71 points), textile composite (47 points), technology (32 points) and pharmaceuticals (17 points).

Foreign investors bought shares worth $4 million during the week under review compared with net buying of $7.7 million in the previous week, AHL added.