Stocks eke out modest weekly gains; market remains focused on IMF talks

Stocks eked out weekly gains amid govt’s assurances about completion of the IMF programme and a relief in petroleum prices. The market will take cue from any fresh developments in talks with the lender but to remain with limited upside until Pakistan wins an IMF deal and defuses political instability.

The benchmark KSE 100-share index closed at 41,599 points, up by 112 points (0.27 percent) on a week-on-week basis.

“Market participants will be closely monitoring the developments on Pakistan’s ninth review of the IMF programme,” said Brokerage Arif Habib Ltd.

“Materialisation of any funds and commitment from other countries and the financial institution will help bring the IMF programme on track, making the overall sentiment of the market positive.”

The market opened on a positive note after IMF’s resident representative dismissed rumours that Pakistan needed to raise $8 billion instead of $6 billion, to finance the external debt repayments.

Moreover, political tensions relatively eased after the chaos that was witnessed a week earlier. Additionally, the price of petrol was reduced by Rs12/litre while the price of high-speed diesel was reduced by Rs30/litre.

During the outgoing week, economic numbers released by the authorities showed that the current account posted a surplus of $18 million in Apr’23 while the large scale manufacturing industry output declined by 8.1 percent year-on-year during 9MFY23.

Moreover, the government raised Rs444 billion through a T-bill auction.

auction held was for shorter tenor papers where the government accepted bids worth Rs444 billion, broadly in the 3 months tenor, at flat rates compared to the previous auction's cut offs. SBP-held forex reserves fell by $72 million WoW to $4.38 billion.

The PKR depreciated against the USD by PKR 0.74 (-0.26 percent) on a week-on-week basis, closing the week at 285.8/USD. Average volumes arrived at 130.5 million shares (down by 2 percent WoW) while

the average value traded settled at $ 12.1 million (down by 14 percent WoW).

Foreigner buying was witnessed during the week, clocking in at $0.6 million compared to a net buy of $1.1 million last week. Major buying was witnessed in E&P’s ($0.7 million) and commercial banks ($0.7 million). On the local front, selling was reported by insurance ($4.0 million) followed by mutual funds ($1.5 million).

Sector-wise positive contributions came from fertiliser (146 points), commercial banks (64 points), miscellaneous (40 points), chemicals (37 points), and automobile assemblers (21 points). Scrip-wise positive contributors were ENGRO (73 points), UBL (66 points), FFC (60 points), POL (39 points), and PSEL (38 points).

The sectors which contributed negatively were cement (84 points), pharmaceuticals (4 points), inv. banks/inv. cos. (3 points) iv) E&P’s (2 points) and engineering (2 points). Meanwhile, scrip-wise negative contributions came from MARI (21 points), PPL (17 points), MEBL (13 points), BAHL (12 points), and SYS (11 points).

Analyst Amreen Soorani at JS

Research said after a positive start, the KSE100 Index succumbed to bears in the second half of the week where the initial gains were wiped out in the later days with developments on the political and macro landscape.

Federal budget for the year FY24 related news began in the week with reported government macro targets. The government targets fiscal deficit at 5 percent of GDP for FY24, with a revenue target of Rs9 trillion.

On the IMF front, the stance regarding continued talks was maintained by government and IMF officials, both. On global trade, development between Pakistan and Iran took place as the PM Sharif and the President of Iran signed an agreement regarding open border projects.

Nabeel Haroon, an analyst at Topline Securities, said volume continued to remain at the lower end as investors preferred to remain on the sidelines amid ongoing political uncertainty in the country.

“Mix statements by the government regarding the IMF programme also kept the investor sentiment in check, where news flow suggested the government is now ‘considering’ a new IMF programme on renewed conditions,” he said.