PSX remains range bound ahead of EFF approval

KSE-100 index gains 410 points, or 0.5% WoW, settles at 78,898

KARACHI:

Pakistan Stock Exchange (PSX) remained range bound in the outgoing week as investors awaited the International Monetary Fund (IMF) board's approval of $7 billion Extended Fund Facility (EFF) and due to worries over potential foreign fund outflows due to the upcoming FTSE rebalancing.

However, the KSE-100 index recorded thin gains of around 400 points on the back of Consumer Price Index (CPI)-based inflation reading, which fell to single digit for the first time in three years at 9.6% for August 2024. The easing of inflation sparked hopes for a policy rate cut in the upcoming monetary policy committee (MPC) meeting.

Among other key highlights was a 20% drop in international crude oil prices since early 2024, the borrowing of Rs835 billion in a T-bills' auction and the narrowing of August trade deficit to $1.68 billion, the lowest for 11 months. Daily trading activity showed that the PSX dropped over 200 points on Monday owing to profit-taking in selected shares amid economic uncertainty and worries over the regulatory oversight of stock trading.

Next day, the market recorded a slim rise of 73 points, reversing the previous day's downtrend, in the backdrop of an encouraging CPI-based inflation rate of 9.6% for August. The bourse continued its upward momentum on Wednesday, climbing up nearly 500 points, driven by optimism about rate cut in the upcoming State Bank of Pakistan's (SBP) monetary policy announcement.

The KSE-100 displayed range-bound movement and closed flat the following day, when weak economic numbers and delay in approval of the IMF loan programme weighed on investor interest. Stocks posted thin gains on Friday as investors took profit after an earlier spike in the index. The lack of positive news made market players cautious, resulting in limited activity in major stocks.

The benchmark KSE-100 index ended the week at 78,898 points, gaining 410 points, or 0.5% week-on-week (WoW).

JS Global analyst Wadee Zaman, in his review, wrote that the KSE-100 remained largely range bound during the outgoing week, posting gains of 0.5%. Average daily trading volumes increased 12% WoW. He said that investors awaited the IMF board's approval of the EFF for Pakistan while the upcoming FTSE index rebalancing may trigger foreign outflows in the near term.

The week began with the CPI coming down to 9.6% for August, marking the first single-digit inflation rate in three years. A notable development was a significant drop in international oil prices, which have fallen 20% since their peak in early 2024, Zaman said. Moreover, the government raised Rs835 billion from the sale of T-bills, surpassing the auction target without lowering cut-off yields.

Pakistan's trade deficit for August narrowed to $1.68 billion, the lowest in 11 months while cement dispatches fell 18% year-on-year (YoY) in July and August 2024 due to elevated prices.

Also, petroleum, oil and lubricant (POL) sales dipped 14% YoY in August. Among corporate news, Kohat Cement, along with its annual results, announced the buyback of up to 12 million shares, representing 20% of the free float, which caused the stock to touch its upper circuit for two consecutive days, the JS analyst added. Arif Habib Limited (AHL), in its report, noted that the stock market commenced trading on a negative note where investors resorted to profit-taking.

"The momentum shifted towards green zone post-announcement of a single-digit inflation of 9.6% (a 34-month low), renewing expectations of a reduction in policy rate in the upcoming MPC meeting," it said. On the IMF front, the government was hopeful that all conditions and requirements of the lender would be met on time and Pakistan's case would be approved by its board.

Moreover, the SBP's foreign currency reserves climbed up $33 million WoW and reached $9.4 billion.

Foreign investors sold shares worth $6.7 million during the week under review compared to last week's net buying of $3.7 million.