PSX comes off peak on profit-taking
Pakistan Stock Exchange (PSX) extended its bull-run and soared to a record high above 86,000 points during the outgoing week, but later profit-taking at high valuations erased all the earlier gains and the KSE-100 index closed with a marginal decline of over 200 points.
Despite the fall in average trading volumes, local investors remained active, offsetting foreign selling and demonstrating their confidence in market fundamentals.
The highlight of the week that triggered the rush towards record highs was the successful holding of Shanghai Cooperation Organisation (SCO) summit in Islamabad, which enhanced bilateral cooperation with China across various sectors, including security and technology.
The summit coincided with the inauguration of Gwadar International Airport, strengthening ties between the two nations.
On the economic front, however, the large-scale manufacturing (LSM) output contracted 2.6% year-on-year (YoY) in August alongside the widening of trade deficit to $1.8 billion in September.
The central bank's reserves rose past $11 billion while Pakistan Investment Bond (PIB) yields dropped significantly, reflecting a further reduction in borrowing costs for businesses in the coming months. At the start of the week on Monday, profit-taking drove stocks downwards by over 200 points as political uncertainty and foreign fund outflows weighed heavily on investor interest.
On Tuesday, the market made a strong rebound, driven by the surge in blue-chip stocks and renewed investor confidence during the ongoing corporate earnings season.
Next day, the KSE-100 reached a new record high in a rally triggered by easing political noise and speculation about economic commitments at the SCO summit.
PSX succumbed to profit-taking on Thursday and came down from record highs where political noise, uncertainty about judicial reforms and foreign outflows dampened investor sentiment.
Continuing the previous trend, profit-takers dominated proceedings on Friday as well, pulling the index down by 335 points.
The benchmark KSE-100 index closed the week with a marginal decline of 233 points, or 0.27% week-on-week (WoW), and settled at 85,250.
JS Global analyst Wadee Zaman, in his review, wrote that the KSE-100 remained flat during the outgoing week, posting a marginal loss of 0.3%.
Average volumes dropped 15% WoW to 442 million shares. Foreigners sold shares worth $12 million, which was offset by buying from local companies and mutual funds, he said.
During the week, Pakistan successfully hosted the SCO summit where Pakistan and China agreed to further enhance bilateral cooperation in multiple sectors including security, education, agriculture and science and technology in addition to the inauguration of Gwadar International Airport during the Chinese prime minister's visit.
Among other news, Zaman mentioned, after the termination of five independent power producers' (IPPs) contracts, the government was proposing to halt payments to 18 other IPPs with total production capacity of 4,267 megawatts.
In a T-bills' auction, the government raised Rs716 billion with a slight dip of five basis points in the six-month yield. It also raised Rs181 billion through the sale of PIBs where cut-off yields fell significantly across different tenors.
Meanwhile, the State Bank's reserves increased $215 million to $11 billion, the JS analyst added.
Arif Habib Limited (AHL), in its report, stated that bull-run persisted at the PSX during the outgoing week, with the index reaching a record high above 86,000 points on Wednesday. The rally was fuelled by investor optimism surrounding the SCO summit.
On the economic front, LSM output recorded a 2.6% YoY decline in August, though it saw a recovery of 4.7% month-on-month.
Additionally, Pakistan's trade deficit widened 24% YoY to $1.8 billion in September. Yields in the recent PIB auction registered a sharp drop, with two-year PIBs falling 74 basis points.
Pakistani rupee depreciated against the US dollar by Rs0.02, or 0.01% WoW, closing at Rs277.6.
Sector-wise, negative contribution came from commercial banks (293 points), power generation (131 points), fertiliser (95 points), cement (65 points) and paper and board (28 points).
The sectors that mainly contributed positively were refineries (93 points), tobacco (82 points), engineering (65 points), pharmaceutical (49 points) and automobile assemblers (34 points).
Foreigners' selling continued during the week, clocking in at $11.6 million compared to net selling of $22.6 million last week, AHL added.