Stocks to rely on support of friendly countries

Pakistan stocks closed lower during the outgoing week, with investors expecting a mixed one ahead unless financial support pours in from friendly countries, which could affect the market positively, traders said.

“Keeping in view, the developments on the political and economic front, the market is expected to remain range-bound,” brokerage Arif Habib Limited said in its weekly report.

“Moreover, we believe, the market would also be keenly following developments on the external front with any inflows by any bilateral/multi-lateral financial institutions or from any friendly countries likely to trigger positive momentum.”

The market commenced on a negative note this week, carrying forward the momentum from last week owing to concerns over weak economic indicators. Brief positivity was witnessed when the Asian Development Bank approved a $554 million financial package for rehabilitation work post floods, said the report.

The International Monetary Fund’s (IMF) indication that the discussion with Pakistan related to the ninth review was productive, also brought in some positivity; however, that did not sustain later in the week due to an increase in political noise.

Decline of 14 percent in November 2022 remittances and LSMI output drop of 3.6 percent month-on-month or 7.75 percent year-on-year in October 2022, further added to the negative sentiments.

Among other fundamentals, SBP’s foreign exchange reserves dipped by $15 million, clocking at $6.64 billion. With this, the rupee depreciated by Re0.54 or 0.24 percent week-on-week against the US dollar, settling at Rs224.94.

The index closed at 41,301 points, losing 397 points (down 0.95 percent) WoW. Average volumes clocked in at 162 million shares (down 10 percent WoW) while the average value traded settled at $20 million (up 10 percent WoW).

Foreign selling continued during this week, clocking in at $9.6 million compared to a net sell of $6.3 million last week. Major selling was witnessed in commercial banks ($12.0 million) and cements ($0.4 million). On the local front, buying was reported by banks/DFIs ($12.8 million) followed by companies ($6.2 million).

Sector-wise negative contributions came from banks (232 points), chemicals (92 points), automobile assemblers (83 points), power (68 points) and food and personal care products (61 points). Scrip-wise negative contributors were Millat Tractors (77 points), United Bank (70 points), Hubco (68 points), Bank Al Habib (58 points) and Lotte Chemicals (44 points).

Sectors which contributed positively were miscellaneous (164 points) and fertiliser (110 points). Meanwhile, scrip-wise positive contributions came from Pakistan Services (167 points), Systems Limited (132 points), Engro (115 points), Pakistan Tobacco (20 points) and Oil and Gas Development Company (10 points).

Analyst Nabeel Haroon at Topline Securities said the KSE-100 declined by 0.95 percent on a WoW basis, which could be attributed to the delay in the IMF programme as Pakistan and IMF continue to negotiate over the required reforms to resume it.

Analysts said that during the outgoing week, several corporations announced the buyback of shares, which supported the market at a certain level. However, political and economic certainty derailed the gains.

Other major news of the week included the announcement of non-production days by Millat Tractors on account of lower demand, temporary shutdown notice given by Kohinoor Spinning Mills, and first bike sales slump in 25 years. On the Reko Diq project front, the cabinet gave a go-ahead, while Pakistan Petroleum Limited and OGDC announced agreements under the reconstituted Reko Diq project.