Stocks closed higher during the outgoing week on interest rate hike falling in line with market expectations, with the next week likely to track the visit of the International Monetary Fund (IMF) mission, traders said.
“With the IMF mission visiting Pakistan for the 9th review of the programme, the investors’ sentiment is expected to remain strong,” said Brokerage Arif Habib Ltd. “If the review is successful, Pakistan will receive $1.1 billion and be able to get aid from friendly countries.”
Albeit, concerns over inflationary pressure emanating from these measures could potentially pick up in the immediate to medium-term stemming from high domestic fuel prices, augmented electricity and gas tariffs as well as a hit on corporate profitability in the wake of high input costs.
It said that the market remained flattish on the opening bell owing to concerns over a potential massive hike in the policy rate by SBP. “However, the index witnessed a strong momentum after SBP announced only a 100bps increase in the policy rate.”
Moreover, the government made a bold call to resume the IMF programme and its ninth review and announced that it would undertake tough measures to fulfil prerequisites before the resumption of talks (such as a hike in gas and electricity tariffs, and imposition of additional tax and flood levy).
During the week, the government implemented a market-determined exchange rate (which is one of IMF’s pre-requisites), which resulted in the rupee recording a historic low level of Rs262.60 against USD (depreciating by Rs35.93 or 15.64 percent WoW). In response, the IMF has agreed to send a mission to Pakistan in the coming week. The investors welcomed these developments and the robust sentiment took the market above the 40,000 points level.
Meanwhile, SBP foreign exchange reserves plummeted by $923 million, settling at $3.7 billion (lowest since February 2014).
The market closed at 40,451 points, gaining 2,043 points or 5.3 percent WoW (highest weekly return since April 15, 2022). Average volumes arrived at 217 million shares (up 52 percent WoW) while average value traded settled at $33.9 million (up 56 percent WoW).
Foreign buying continued this week, clocking in at $2.8 million compared to a net buy of $4.9 million last week. Major buying was witnessed in banks ($3.0 million) and power ($0.6 million). On the local front, selling was reported by insurance ($8.8 million) followed by companies ($3.9 million).
Sector-wise positive contributions came from banks (653 points), fertilisers (328 points), E&Ps (308 points), and cements (197 points). Scrip-wise positive contributors were Habib Bank Limited (283 points), Engro (198 points), Pakistan Services (150 points), TRG (139 points) and Oil and Gas Development Company (126 points).
The sectors which contributed negatively included pharmaceuticals (24 points) and auto parts (10 points). Meanwhile, scrip-wise negative contributions came from Systems Limited (78 points), Indus Motor (14 points) and Highnoon Laboratories Limited (14 points).
“Our preferred stocks are OGDC, PPL, MARI, MCB, FABL, MEBL, BAFL, LUCK, MLCF, FCCL, ENGRO, FFC, HUBC, PSO, and SNGP,” said Arif Habib Ltd.
Nabeel Haroon at Topline Securities said the positivity in the market could be attributed to the government’s move to step back and let the market factors determine the dollar rate (key condition of IMF programme), Prime Minister’s statement where he reiterated his stance to fulfil all conditions of IMF programme to complete the 9th review, and news that the Fund’s mission would visit Pakistan from January 31-February 9 to continue the discussions for the 9th review under the Extended Fund Facility.