Stocks seen taking cue from progress in IMF talks

Stocks closed lower in the outgoing week amid political and economic uncertainty, while any progress in a staff-level agreement with the International Monetary Fund would direct the market in the week ahead, analysts said.

The Pakistan Stock Exchange benchmark KSE 100-share index closed at 41,330 points, losing 464 points (down 1.11 percent) week-on-week (WoW). Average volumes arrived at 223 million shares (up 7 percent WoW) while the average value traded settled at $29.0 million (up 23 percent WoW).

“An assurance from “friendly countries” to fund a balance of payments gap is the last hurdle in securing an IMF deal,” said brokerage Arif Habib Ltd. “Therefore, a materialisation of the said commitment from these countries will help put the IMF program back on track and aid the sentiment at the index.”

In the outgoing week, the stock market started out positively, as investors were anticipating developments on the IMF program. However, the momentum was disturbed due to noise on the political front, it reported.

Meanwhile, growth was witnessed in workers' remittances in Feb’23 (up by 5 percent) compared to Jan’23 as the Pak rupee continues to find its market-determined value, depreciating against USD by PKR 0.94, 0.93 percent WoW, and closing the week at 281.71/USD.

Moreover, the State Bank of Pakistan reserves slightly climbed up by $18 million to $4.3 billion.

In addition, the government on Wednesday raised Rs26.4 billion through Pakistan Investment Bonds against a target of Rs100 billion.

Foreigner selling continued during the outgoing week, clocking in at $5.0 million compared to a net sell of $2.9 million last week. Major selling was witnessed in commercial banks ($2.5 million) and technology and communication ($2.4 million). On the local front, buying was reported by companies ($15.8 million) followed by individuals ($1.0 million).

Sector-wise negative contributions came from miscellaneous (197 points), technology (155 points), fertilizer (78 points), banks (43 points), and food & personal care (32 points). Scrip-wise negative contributors were PSEL (196 points), SYS (133 points), POL (79 points), ENGRO (54 points) and BAHL (50 points).

The sectors which contributed positively were cement (49 points), glass & ceramics (25 points), and insurance (16 points). Meanwhile, scrip-wise positive contributions came from OGDC (48 points), DGKC (22 points), TGL (13 points), SEARL (13 points), and MLCF (12 points).

KASB Pakistan Research said the lacklustre performance was fuelled by an uncertainty regarding a staff level agreement with IMF despite meeting all conditions.

During the week, large scale manufacturing industries output decreased by 4.4 percent year-on-year on the back of the economic slowdown.

However, foreign exchange reserves witnessed an increase of $18 million and recorded at 4.3 billion, which can cover import bills of less than a month. The international oil prices decreased by 9 percent WoW on growing fears about the international banking system.

Nabeel Haroon at Topline Securities said major developments during the outgoing week included Pakistan car sales (including sales of Non-PAMA members) clocked in at around 6.4k units, down 47 percent month on month and the release of advance trade number for the month of Feb 23 – where exports were recorded at $2.2 billion (down by 2 percent MoM) and import $4 billion (down 17 percent MoM).