PSX remains subdued amid IMF loan delay

KARACHI:

Pakistan Stock Exchange (PSX) experienced a lacklustre week, marked by limited activity and thin losses of around 300 points due to worries over Pakistan's exclusion from the International Monetary Fund (IMF) executive board meeting agenda for August.

The market also remained subdued because of rollover of investor positions at month end and security concerns.

Despite the challenging situation, there were notable developments that helped the bourse make some recovery. Moody's ratings agency upgraded Pakistan's credit rating from Caa3 to Caa2, which brought a glimmer of hope.

Additionally, the repatriation of profits and dividends by foreign investors surged 64-fold to $139.13 million in July 2024 from $2.16 million in the same period of last year.

At the start of the week on Monday, the PSX saw a downturn of 230 points, caused by security concerns, which resulted in increased selling activity. Next day, the KSE-100 index extended losses, when it fell nearly 500 points owing to profit-taking by institutional investors amid economic uncertainty.

Wednesday brought a modest decline of around 100 points, fueled by lingering concerns over the economic situation and uncertainty about the rollover of $9 billion in loans. The KSE-100 turned around the following day with notable gains, driven by falling bond yields and renewed optimism about bridging the external financing gap.

The positive momentum continued on Friday as well with the market benefiting from government's deliberation on the privatisation of state-owned enterprises (SOEs) and a bullish trend in global equities.

Additionally, the government's commitment to reducing power tariffs provided further support. The benchmark KSE-100 index concluded the week at 78,488 points, down 313 points, or 0.40% week-on-week (WoW).

JS Global analyst Wadee Zaman, in his review, wrote that the KSE-100 experienced subdued activity during the outgoing week due to security concerns and the rollover of positions, ending with losses of 0.4%.

Average daily trading volumes showed a WoW rise of 5%. The market saw some recovery in final sessions, driven by external developments, including Moody's upgrading of Pakistan's rating to Caa2, reflecting improved macroeconomic conditions and slightly better government liquidity and external positions, he said.

Although Pakistan was not on the agenda of the IMF executive board meetings scheduled till September 4, "we anticipate that the IMF will approve the Extended Fund Facility (EFF) in the coming weeks". The analyst pointed out that the finance minister had requested a $1.2 billion loan from Saudi Arabia to help bridge the financing gap and secure approval of the EFF next month.

Also, Saudi Arabia has offered to acquire a 15% stake in the Reko Diq mining project. Profit and dividend repatriation softened to $139 million in July, reflecting a month-on-month decline of 67%, the JS analyst added.

Arif Habib Limited (AHL), in its report, observed that the market remained lacklustre throughout the week amid concerns related to Pakistan's absence from the IMF executive board meeting agenda for August. However, on Wednesday, Moody's upgraded Pakistan's credit rating from Caa3 to Caa2. Apart from that, the repatriation of profits and dividends rose 64-fold to $139.13 million in July compared to $2.16 million in the same period of last year.

In its latest weekly update, the State Bank of Pakistan (SBP) said that its foreign currency reserves reached $9.4 billion, up $112 million WoW. Meanwhile, Pakistani rupee appreciated against the greenback by Rs0.20, or 0.07%, at Rs278.5.

Sector-wise, negative contributors to the KSE-100 index were commercial banks (-369 points), cement (-138 points), pharmaceutical (-96 points), technology and communication (-66 points) and leather and tanneries (-63 points). Sectors that contributed positively were power generation and distribution (176 points), fertiliser (145 points) and chemical (93 points).

Foreign investors bought shares worth $3.7 million during the week under review, which exhibited a U-turn from last week's net selling of $0.6 million.