Stocks closed higher during the week amid expectations that the International Monetary Fund programme would resume, though the last day turned negative after the IMF mission left without any firm decision.
Traders believe that the virtual resumption of the dialogue next week would have an impact on the market.
“A key event in the immediate term is the resumption of the IMF programme,” said brokerage Arif Habib Ltd. “The government is expected to review key demands of the IMF over the weekend. Any positive outcome on that front is likely to bring back bulls to the market.”
The market started on a positive note this week in anticipation of Pakistan and the IMF reaching a staff level agreement (SLA), in particular, energy stocks propelled the market to rally in the hope that the circular debt issue would be cleared.
Moreover, the rupee appreciated by Rs7.3 or 2.7 percent WoW against the US dollar, closing the week at 269.3/dollar.
However, on Thursday talks concluded and the IMF left Pakistan without reaching an agreement, which caused the market to spiral in the last trading session.
The sensitive price indicator (SPI) for the week recorded an increase of 0.17 percent due to an increase in the prices of food items. Furthermore, the SBP reserves showcased a reduction of $170 million, to settle at $2.9 billion.
The market closed at 41,742 points, up 1,271 points or 3.14 percent WoW.
Foreign buying continued during this week, clocking in at $3.2 million compared to a net buy of $0.9 million last week. Major buying was witnessed in exploration and production ($4.8 million) and commercial banks ($2.6 million). On the local front, selling was reported by insurance companies ($6.5 million) followed by mutual funds ($5.2 million).
Sector-wise positive contributions came from oil and gas exploration companies (459 points), technology and communication (260 points), commercial banks (252 points), cement (78 points), and pharmaceuticals (70 points). Scrip-wise positive contributors were Oil and Gas Development Company (259 points), Systems Limited (152 points), Habib Bank Limited (103 points), TRG (99 points), and Pakistan Petroleum Limited (97 points).
The sectors which contributed negatively included power generation and distribution (71 points) and sugar and allied industries (3 points). Meanwhile, scrip-wise negative contributions came from Hubco (75 points), Engro (51 points), Unilever Pakistan Foods Limited (12 points), EFU General Insurance Limited (11 points), and Javedan Corporation Limited (6).
KASB Pakistan Research in its weekly analysis report said during the week, the E&P sector was the top performing sector as news of the settlement of circular debt and payment of hefty dividends circulated, as a part of IMF’s negotiations.
Moreover, investors built positions as government finalised new taxation measures necessary to unlock the next $1.1 billion tranche. As part of building reserves, the government also decided to sell its stake in RLNG PP. This resulted in a 2.7 percent rupee appreciation WoW.
“We recommend defensive stocks due to the delay in the conclusion of the ninth review,” suggested KASB Research. However, the E&P sector might see a rally upon the finalisation of the circular debt roadmap.
Nabeel Haroon at Topline Securities said the gain in the market could be attributed to the arrival of the IMF mission to Pakistan for negotiation and agreement on actions and prior actions by the government. However, some profit-taking was observed on Friday – as the IMF mission returned without an agreement on the staff-level agreement, where authorities agreed that a few differences would be discussed in the coming week.
Investor confidence grew as Pakistan inched closer towards the resumption of the IMF programme, as average daily traded volume and value during the week stood at 284 million shares (up 170 percent WoW) and Rs12 billion (up 107 percent WoW) respectively.
