Weekly review: PSX snaps four-week losing streak

KARACHI: The Pakistan Stock Exchange (PSX) ended a volatile week in green after four weeks as clarity on talks with the International Monetary Fund (IMF) officials and rising international oil prices helped the benchmark KSE-100 index gain 344 points, or 0.8%, during the outgoing week to settle at 44,821.53 points.

The market was driven largely by the news flow relating to the IMF's review regarding the $6 billion loan programme.

Trading kicked off on a negative note on Monday as concerns over high energy and commodity prices and prospects of an increase in the electricity tariff — that can lead to erosion of purchasing power and an economic contraction — dampened investors’ sentiment.

The market took a breather on Tuesday; however, overall sentiment remained choppy as the delay in the ISI chief's notification and higher international oil prices kept investors’ concerns alive over inflationary pressures and further monetary tightening by the State Bank of Pakistan.

However, the bullish momentum was short-lived as the stock exchange once again landed in the red on Wednesday as market players took a negative cue from the depreciating rupee against the US dollar, which dropped to an all-time low of Rs171.20 during the week.

Moreover, investor expectations about weak quarterly financial results also left a negative impact on trading activity at the bourse.

On Thursday, the trend reversed for the better after Shaukat Tarin assured the nation that the government would resume the IMF’s Extended Fund Facility, as well as Prime Minister Imran Khan's statement allaying any rumours of a military-political divide strengthened investors’ sentiment.

The uptrend continued on Friday as market players cherry-picked stocks that had fallen to attractive valuations due to a prolonged bearish spell in the past few days.

Moreover, a jump in international crude oil prices — which touched a fresh three-year high, climbing above $85 a barrel on forecasts of a supply deficit — also fuelled bullish trading at the local bourse and investors took a cue from the rise and made fresh investments in oil stocks, which lent support to the benchmark KSE-100 index.

Other major developments during the week were: Pakistan received a record $8 billion in remittances in July-September, auto sales jumped 84% during the outgoing quarter, gas deficit looms large as Pakistan LNG Limited failed to procure eight LNG cargoes, an OGRA notice pushed RLNG price to a 15-month high, IMF projected 4% GDP growth for Pakistan in 2022, and the government-approved Rs1.39 per unit hike in base tariff imminent.

Foreign selling continued this week, clocking at $13.3 million against a net sell of $3.7 million recorded last week. Selling was witnessed in fertiliser ($12.1 million), commercial banks ($7.8 million) and cement ($3.11 million).

On the domestic front, major buying was reported by insurance companies ($12.2 million) and mutual funds ($3.4 million).

During the week under review, average volumes clocked in at 342 million shares (up by 29% week-on-week), meanwhile average value traded settled at $71 million (up by 20% week-on-week).

Major gainers and losers of the week

Sector-wise positive contributions came from commercial banks (+393 points), oil and gas exploration companies (+136 points), fertiliser (+123 points), cement (+98 points), and pharmaceutical (+28 points), whereas negative contributions came from technology and communication (-342 points), and food and personal care products (-50 points).

Scrip-wise major gainers were HBL (+153 points), Pakistan Petroleum (+87 points), UBL (+67 points), Lucky Cement (+59 points) and Oil and Gas Development Company (+42 points). On the flip side, major losers were TRG Pakistan (-260 points), Systems Limited (-70 points) and Pakistan Tobacco Company (-27 points).

Outlook for next week

A report from Arif Habib Limited predicted: “As we get closer to resuming the IMF programme and receiving a $1 billion tranche, we expect the market to perform well in-tandem.”

“Whereas recent bouts of selling at the index has once again opened up valuations, we advise investors to cherry-pick blue-chip stocks with a long term focus,” it said, adding, however, key short term risks include regional volatility and the ensuing security concerns, together with rupee depreciation.

“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.