Prolonged talks with IMF, unfavourable FATF verdict clipped gains during the week
KARACHI: A shorter trading week at the Pakistan Stock Exchange (PSX) ended on a positive note as the benchmark KSE-100 gained 757 points or 1.7% to settle at 45,578.36 points despite economic uncertainty.
The sentiment at the local bourse showed signs of improvement in the week as investors initially remained undeterred by the economic gloom caused by the uncertainty regarding the prolonged talks between Pakistan and the International Monetary Fund (IMF).
The week kicked off on a negative note as the market reacted to the news regarding the delay in the resumption of the $6 billion IMF programme. Moreover, continuous depreciation in the rupee against the US dollar, a massive hike in petroleum prices, and dismal economic data added fuel to the negative momentum.
The market remained closed on Tuesday on account of 12th Rabi ul Awal.
Trading resumed on Wednesday with the market rebounding as clarity on IMF talks emerged. IMF Director of the Middle East and Central Asia Department Jihad Azour said talks between Pakistan and the IMF on the $6 billion Extended Fund Facility (EFF) are progressing in a "very good" manner.
Moreover, a decline in the current account deficit for the month of September — which narrowed down to $1.11 billion — added fuel to the momentum.
The uptrend continued on Thursday as positive news regarding the expected exclusion of Pakistan from the Financial Action Task Force’s (FATF) grey list, coupled with a host of encouraging financial results, positively impacted the investment climate.
However, the last trading session of the outgoing week recorded losses as contrary to the market expectation, the FATF retained Pakistan on the grey list, while noting that "good progress" has been made in completing the required action items for removal from the list.
Other major developments during the week were: Telecard Limited announced term finance certificate (TFC) structuring, Oil and Gas Development Company (OGDC) discovered gas reservoirs in Balochistan’s Kohlu district, the government secured LNG from Qatar to meet winter demand, auto financing reached a record high in September and SBP foreign exchange reserves declined by $1.6 billion to $17.49 billion on account of external debt repayments and $1 billion Sukuk maturity.
Foreign selling continued this week, clocking at $7.3 million against a net sell of $13.3 million recorded last week. Selling was witnessed in fertiliser ($4.5 million) and commercial banks ($3.8 million).
On the domestic front, major buying was reported by insurance companies ($4.6 million) and other organisations ($2.5 million).
During the week under review, average volumes clocked in at 299 million shares (down by 13% week-on-week), meanwhile average value traded settled at $64 million (up by 10% week-on-week).
Sector-wise positive contributions came from commercial banks (+463 points), cement (+184 points), oil and gas exploration companies (+137 points), fertiliser (+107 points), and insurance (+42 points), whereas negative contributions came from technology and communication (-155 points), and food and personal care products (-31 points).
Scrip-wise major gainers were HBL (+187 points), UBL (+150 points), Engro Corporation (+99 points), Lucky Cement (+72 points) and MCB (+64 points). On the flip side, major losers were TRG Pakistan (-113 points), Pakistan State Oil (-27 points) and Systems Limited (-26 points).
A report from Arif Habib Limited predicted: “We expect the market to remain positive in the upcoming week. With IMF and Pakistan expected to reach an agreement soon, the investor sentiment is anticipated to remain buoyant.”
“Moreover, with the ongoing result season, certain sectors and scrips are expected to stay under the limelight,” it said, adding, however, keeping in view concerns over inflation and devaluation of Pakistani rupee against the greenback, investors are expected to have a cautious approach.
“The KSE-100 is currently trading at a PER of 5.2x (2021) compared to Asia-Pacific regional average of 14.7x while offering a dividend yield of 8.1% versus 2.2% offered by the region,” the brokerage house stated.