PSX sheds value in range-bound trading

KARACHI:

Pakistan Stock Exchange (PSX) exhibited range-bound movement during the outgoing week, caused by a mix of positive and negative triggers, and the KSE-100 index recorded modest losses of over 500 points.

The market recovered later in the week, driven largely by optimism surrounding the possibility of single-digit inflation, which could lead to a reduction in the State Bank of Pakistan's (SBP) policy rate in its monetary policy meeting in September.

In addition, the country's foreign exchange reserves, held by the SBP, increased $119 million to a four-week high of $9.27 billion. Investors awaited some positive development about the approval of $7 billion loan programme by the International Monetary Fund (IMF) board, which was expected later this month.

However, there was persistent uncertainty about the fate of independent power producers (IPPs), which had been mainly blamed for the exorbitant consumer tariff. Pakistan's trade deficit widened significantly in July while large-scale manufacturing (LSM) moved higher slightly.

Day-to-day movement of the market showed that the PSX saw a significant downturn on Monday when the KSE-100 index dived nearly 600 points in a selling spree driven by a poor economic outlook.

Continuing its downward trajectory, it fell over 100 points on Tuesday in a range-bound session, marked by growing political uncertainty and economic concerns.

On Wednesday, the PSX remained closed as the nation celebrated the 77th Independence Day. Next day, the bourse registered a modest recovery, gaining over 200 points on the back of a robust corporate earnings outlook.

Stocks lost some ground on Friday over political uncertainty following the arrest of three retired army officers in connection with the court martial of an ex-ISI chief.

The benchmark KSE-100 index closed at 78,045 points, reflecting a loss of 525 points, or 0.7% week-on-week (WoW).

JS Global analyst Wadee Zaman, in his report, wrote that the KSE-100 remained largely range bound throughout the week, ending with modest WoW losses of 0.7% at 78,045 points. Average traded volumes increased 12%. The market experienced some recovery towards the end of the week, fuelled by expectations of single-digit inflation – a milestone not seen in the past three years – which could lead to a potential policy rate cut in the monetary policy meeting in September, he said.

In the MSCI quarterly review, Sazgar Engineering Works was moved from the MSCI Small-cap Index to the MSCI Frontier Markets (FM) Index, while six stocks were added to the Small-cap Index and two were removed. On the economic front, the SBP's foreign exchange reserves rose $119 million and reached $9.2 billion. Additionally, the government reduced petrol price by Rs8.47 per litre and diesel price by Rs6.7/litre for the current fortnight.

Large-scale manufacturing (LSM) data showed a flat year-on-year (YoY) growth of 0.92%. Auto sales declined 36% month-on-month (MoM), halting the recent recovery, but they were still up 70% YoY owing to a low base effect, said the JS analyst.

Arif Habib Limited (AHL), in its report, observed that during the four-day week, the market remained range bound.

The week started on a positive note as on Monday in the MSCI review, Pakistan's weight in the FM space rose to 3.9%. Additionally, the government raised Rs119 billion against the target of Rs100 billion through Ijarah Sukuk. LSM output for FY24 went up 0.92% YoY. However, trade deficit increased 21% YoY to $2 billion in July and the rupee depreciated against the US dollar by Rs0.15, 0.05%, at Rs278.7.

Sector-wise, positive contribution to the bourse came from exploration and production (267 points), leather and tanneries (42 points), fertiliser (23 points), investment banking (8 points) and sugar (6 points).

Sectors that mainly contributed negatively were cement (354 points), banks (210 points), power (95 points), auto assemblers (54 points) and auto parts (43 points). During the week, foreign investors bought stocks worth $5.26 million compared to net buying of $1.41 million last week, AHL added.