Saturday June 15, 2024

Stocks expected to stay range-bound next week, awaiting clarity on IMF programme

By Shahid Shah
May 28, 2023

KARACHI: Pakistan stocks closed lower during the outgoing week amid political and economic uncertainty. The market is expected to stay around developments on the IMF programme next week, traders said.

The market closed at 40,964 points, down by 635 points (-1.53 percent) week-on-week (WoW). Average volumes arrived at 118 million shares (down by 10 percent WoW) while the average value traded settled at $13 million (down by 2 percent WoW).

“All eyes are on the progress of the ninth review of Pakistan's IMF programme,” said brokerage Arif Habib Ltd. “Market participants recognise that the materialisation of funds, along with commitments from other countries and financial institutions, will play a pivotal role in bringing the IMF programme back on track.”

Another crucial event on the horizon is the presentation of the budget scheduled for June 9, 2023 which market observers will be closely monitoring. The market sentiment remained predominantly negative during the outgoing week, primarily due to the prevailing uncertainty regarding resumption of the International Monetary Fund – IMF programme, stated the brokerage.

During the week, economic numbers released by the authorities showed that Pakistan’s GDP grew by 0.29 percent in FY23, a sharp drop compared to the previous year’s 6.1 percent growth. Additionally, SBP-held forex reserves fell by $119 million WoW to $4.19 billion. The rupee depreciated against the dollar by Rs0.67 (-0.23 percent) WoW, closing the week at 285.15/USD in the interbank market. However, the rupee traded up to 310 a dollar during the week in the open market due a gap between demand and supply of the greenback.

Foreigner selling was witnessed during this week, clocking in at $2.1 million compared to a net buy of $0.6 million last week. Major selling was witnessed in fertilizer ($1.1 million) and technology and communication ($1.0 million). On the local front, buying was reported by banks and DFIs ($2.4 million) followed by individuals ($1.3 million).

Sector-wise negative contributions came from commercial banks (112 points), oil and gas exploration companies (70 points), technology and communication (63 points), power (56 points), and fertilizer (44 points). Scrip-wise negative contributors were HUBC (47 points), UBL (39 points), OGDC (39 points), PPL (36 points), and SYS (28 points).

The sectors which contributed positively were food & personal care products (25 points), textile composite (18 points), and textile spinning (7 points). Meanwhile, scrip-wise positive contributions came from NESTLE (18 points), ENGRO (16 points), UPFL (14 points), GATM (13 points), and COLG (9 points).

Analyst Muhammad Waqas Ghani at JS Research said the week started on a negative note over the worsening political situation and ongoing delay in the resumption of the IMF programme. The negative momentum persisted as investors sought to secure profits amid mixed developments on the political and macro landscape.

He said that the budget-related news continued during the week with news reports pertaining to the government's macro targets. The federal government reportedly targets a fiscal deficit of 5 percent of GDP, with a revenue target of around Rs9 trillion for FY24.

On the IMF front, the stance regarding continued talks was maintained by both government and IMF officials. Notices by listed companies started to pour in, announcing increases in share capital during the latter half of the week after the proposal of tax imposition on distributable reserves of listed and non-listed companies by the reforms commission surfaced.

Nabeel Haroon, an analyst at Topline Securities, said that the decline in KSE 100 Index could be attributed to diminishing chances of revival of the ongoing IMF programme as the programme will expire on June 30, 2023, and a widening gap in USD price between interbank and open markets.