Earnings, global markets help PSX recover
Pakistan Stock Exchange (PSX), after coming under pressure initially, rebounded and closed with a modest rise of nearly 350 points in the outgoing week as investor interest grew in the face of robust corporate results and recovery in global equities.
At the beginning, the market's momentum was largely influenced by investor hesitation, caused by global equity sell-offs over fears of a potential US recession and escalating tensions in the Middle East.
Some events on the domestic front including the economic and political uncertainty also impacted sentiment in the market.
However, positive indicators also emerged during the week such as a stable Pakistani rupee and the T-bills' auction where yields came down for all tenures.
Additionally, workers' remittances remained robust, surging around 48% to $3 billion in July while the State Bank of Pakistan's (SBP) foreign exchange reserves increased $51 million to $9.15 billion.
Day-to-day movement of the market showed that the KSE-100 index plunged more than 1,100 points on Monday in a widespread bearish spell, sparked by the global equity sell-off over fears of US recession and tensions in the Middle East.
Next day, the index recovered slightly, marked by gains in second and third-tier shares, primarily due to a rebound in global equities and strong corporate earnings.
The bourse slightly dipped by nearly 80 points in a range-bound session on Wednesday in the backdrop of economic and political uncertainty, which made investors jittery.
The following day, stocks rallied and surged around 750 points, buoyed by robust corporate earnings and expectations about government measures to manage its external account and secure debt rollovers.
Bulls kept a firm grip over the PSX on Friday as they propelled the KSE-100 higher by nearly 700 points, taking cue from encouraging corporate results and positive global markets.
The benchmark KSE-100 index closed the week at 78,570 with modest gains of 344 points, or 0.4% week-on-week (WoW).
JS Global analyst Shagufta Irshad, in her report, wrote that the KSE-100 experienced a subdued performance during the early part of the week, largely due to global uncertainties and a surprising 15-basis-point (bps) rate hike by the Bank of Japan, which had a spillover effect on Pakistan's market.
However, the PSX rebounded strongly in the latter half of the week, driven by strong results in the oil and gas exploration sector, which propelled the market to a positive WoW close, she said. Average daily trading volumes increased by 38% WoW. The company having the strong results was Mari Petroleum, which declared higher payouts and 800% bonus shares.
Additionally, news about the anticipated divestment of profitable entities like Oil and Gas Development Company and Pakistan Petroleum Limited to global companies further energised the sector, she said. Other positive developments included remittances reaching $3 billion in July, significantly up by 48% YoY, and a reduction in cut-off yields by 52bps, 54bps and 50bps for three-, six- and 12-month papers, respectively, in the T-bills' auction, the JS analyst added.
Arif Habib Limited (AHL), in its report, observed that initially the market faced pressure due to investor selling. However, some key economic developments emerged later like Pakistan securing one-year debt rollover commitments from key lenders – a crucial step before final approval of a $7 billion IMF loan programme.
Additionally, the SBP raised Rs355 billion in the T-bills' auction, where cut-off yields dropped. Kibor also fell across all tenors in the range of 2-40bps.
The SBP reserves increased by $51 million and settled at $9.2 billion. Furthermore, the rupee depreciated against the US dollar by Rs0.05, or 0.02%, at Rs278.5.
Sector-wise, positive contribution came from exploration and production (614 points), technology (84 points), oil and gas marketing companies (51 points), food and personal care product (22 points) and leather and tanneries (9 points).
During the week under review, foreign investors bought shares worth a net $1.4 million compared to stock selling of $2.2 million last week, AHL added.