Pakistan’s stock market ended the week on a high note, boosted by the announcement of general elections in January and the appreciation of the rupee against the dollar, but dealers warned that investors would remain cautious ahead of key economic indicators.
"Market participants are advised to pay close attention to economic news as it will influence the market overall," said brokerage Arif Habib Ltd. "Given the IMF's persistent call for gas price adjustments to address the circular debt issue, the caretaker government is expected to implement gas price hikes in the upcoming week."
The market sentiment remained predominantly positive this week, bolstered by significant developments on the economic and political front. On the political front, the Election Commission of Pakistan has announced that the general elections in the country would be held in the last week of January 2024, which has effectively settled uncertainty in the market.
Moreover, in the latest treasury bills auction, cut-off yields declined by as much as 217 basis points for various tenors. In addition to this, the rupee exhibited a consistent appreciation trend over the course of the week. rupee closed against teh dollar at 291.76, gaining RS5.1 (or 1.7 percent) week-on-week. This led to an increase in confidence among market participants, reinforcing their positive outlook on the market.
Moreover, last week SBP's reserves increased by $56 million, reaching $7.7 billion.
Overall, the market closed at 46,421 points, increasing by 668 points (or 1.5 percent) week-on-week. Average volumes arrived at 139 million shares (down by 13 percent week-on-week) while the average value traded settled at $15.4 million (down by 25 percent week-on-week).
Foreigner buying was witnessed during this week, clocking in at $0.29 million compared to a net sell of $9.67 million last week. Major buying was witnessed in commercial banks ($1.69 million) and technology and communication ($1.3 million). On the local front, selling was reported by insurance companies ($1.35 million) followed by banks/DFIs ($1.21 million).
Sector-wise positive contributions came from commercial banks (202 points), power generation and distribution (111 points), oil & gas exploration companies (96 points), chemical (77 points), and pharmaceutical (31 points). Scrip-wise positive contributors were UBL (106 points), HUBC (103 points), COLG (59 points), MCB (49 points), and PPL (35 points).
Meanwhile, the sectors which mainly contributed negatively were technology & communication (14 points), and fertilizer (7 points).
Meanwhile, scrip-wise negative contributions came from SYS (28 points), ENGRO (20 points), UPFL (10 points), CHCC (9 points), and BAFL (9 points).
Analyst Nabeel Haroon at Topline Securities said the recovery in the market can be attributed to the appreciation of the Rupee against the USD, the Election Commission of Pakistan's statement that general elections will be held by the end of January 2024, and partly to a statement by Barrick Gold Corp CEO where he highlighted newfound interest by multinational mining firms to develop the $7 billion Reko Diq gold and copper mine in Balochistan. In the T-bill auction, the government raised Rs2.4 trillion against the target of Rs2.25 trillion, where yields on 3-, 6- and 12-month bonds were down by 171-217bps.
Muhammad Waqas Ghani, an analyst at JS Research, said the benchmark index began the week on a positive note as investors welcomed the central bank's decision to maintain its policy rate at 22 percent, alleviating concerns about a potential interest rate hike amid increasing inflation.
On the economic news front, as per PBS, Large Scale Manufacturing posted a 1.1 percent decline year-on-year in July 2023. While the data remained in the red zone for the 11th consecutive month, the declining pace contracted over a lower base. On a month-on-month basis, July continued to witness a 3.6 percent decrease in output.