The Pakistan Stock Exchange (PSX) recovered its losses from the previous week as the benchmark KSE-100 index gained 740 points or 1.6% and settled at 46,489.41 points. Throughout the week, trading remained volatile with the index concluding three out of five sessions in the red.
The week commenced on a negative owing to the uncertainty pertaining to the International Monetary Fund (IMF) loan program and mounting inflationary pressure.
The sentiment, however, reversed on Tuesday as the market picked up momentum with the government’s agreement to pay Rs190 billion to independent power producers (IPPs) and its decision to not change the petroleum prices.
Investors failed to keep up the momentum and the market recorded losses on Wednesday and Thursday owing to a surprise move, in which the State Bank of Pakistan (SBP) decided to move its next meeting forward from the previously announced date of November 26, 2021.
The change in the schedule triggered speculation that the central bank may be tightening interest rates to curtail inflation.
Furthermore, investors remained guarded regarding developments on the political front, with the joint sitting of the Parliament driving many to observe from the sidelines during the two sessions.
The apprehensions turned out to be temporary as a rally was observed during the last day of the trading week as investors became optimistic owing to to the large-scale manufacturing Industries (LSMI) output number that rose by 5.15% in the first quarter (July-September) of the ongoing fiscal year 2021-22 compared with the same period of the last fiscal year 2020-2021, as nearly all major manufacturing sectors posted growth.
However, some volatility was witnessed owing to the expectation that the SBP was set to announce a new benchmark interest rate towards the end of the session, with a widespread belief that the policy rate would be increased.
As expected, the central bank raised its benchmark policy rate by 150 basis points to 8.75% for the duration of one month.
A number of other important developments during the week that impacted investor sentiment include the adviser to Prime Minister on Finance and Revenue Shaukat Tarin outlining five actions demanded by the IMF, the government’s decision to pay IPPs Rs190 billion as equity of DISCOs, remittances touching $10.6 billion in July-October, and foreign direct investment declining by 12% in four months.
The week saw a continuation of foreign selling clocking at $25 million compared to a net sell of $5.3 million recorded during the previous week. Selling was observed in commercial banks ($14.7 million) and fertiliser ($4.7 million).
In terms of the domestic front, major buying was reported by insurance companies ($13.5 million) and companies ($7.7 million).
Average volumes clocked in at 245 million shares (down by 23% week-on-week), while average value traded closed at $53 million (down by 17% week-on-week) during the week under review.
Key gainers and losers of the week:
Sectors with positive contributions include banks (+430 points), fertiliser (+127 points), cement (+158 points), exploration and production (+140 points), and power (+43 points), whereas negative contributions came from technology (-176 points), and fast-moving consumer goods (-41 points).
Scrip-wise major gainers were Meezan Bank (+96 points), Lucky Cement (+76 points), UBL (+73 points), Pakistan Petroleum (+72 points), and MCB (+71 points). On the other hand, major losers were TRG Pakistan (-233 points), Unity Foods (-32 points), and PSX (-16 points).
Expectations for next week:
Arif Habib Limited released a report predicting that following clarity regarding the monetary policy, “we believe the market will react accordingly next week”.
It added, “The recent bill to make SBP autonomous, as well as the MPC’s stance, should now effectively remove another pre-condition of the IMF and therefore, we believe that market sentiment is hinged upon announcement of the IMF package”.
According to the brokerage house, “The KSE-100 is currently trading at a PER of 4.9x (2022) compared to Asia-Pacific regional average of 14.8x while offering a dividend yield of 8.4% versus 2.2% offered by the region”.
