Stocks end week on high note, bets on budget continue to drive market

Pakistan stocks closed higher by 388 points in the outgoing week amid bets on the upcoming federal budget for the fiscal year 2023-24, which may continue to set the market direction next week. “The market is expected to remain range-bound given Federal Budget 2023-24 is scheduled to be announced on June 9, 2023, which will determine the market direction in the future,” said brokerage Arif Habib Ltd. “Furthermore, the market participants will also be closely monitoring the progress of the ninth review of Pakistan's IMF programme.”

The market opened on a positive note, in anticipation of certain budgetary measures indicating tax on corporates that have avoided announcing payouts recently, which is likely to propel companies to revive payouts, according to the brokerage. The KSE-100 index closed at 41,352 points, up by 388 points (0.95 percent) week-on-week. Average volumes arrived at 180 million shares (up by 53 percent WoW) while the average value traded settled at $18 million (up by 35 percent WoW). Moreover, a statement from the International Monetary Fund (IMF) indicated that it continued to engage with the incumbent government, to pave the way for a board meeting to resume the programme. However, market momentum started to slow down as economic numbers released by the authorities showed the highest inflation numbers for the month of May’23, at 38.0 percent compared to 36.4 percent in Apr’23 and 13.8 percent in May’22.

Additionally, forex reserves held by the State Bank of Pakistan fell by $218 million to $4.09 billion. The PKR depreciated against the USD by PKR 0.52 (-0.1 percent) WoW, closing the week at 285.67/USD.Foreigner buying was witnessed during the outgoing week, clocking in at $3.6 million compared to a net sell of $2.1 million last week. Major buying was witnessed in foods and personal care ($4.0 million) and commercial banks ($2.2 million). On the local front, selling was reported by mutual funds ($3.2 million) followed by insurance companies ($2.5 million).

Sector-wise positive contributions came from technology and communication (110 points), cement (100 points), fertiliser (75 points), E&Ps (53 points) and engineering (29 points). Scrip-wise positive contributors were SYS (73 points), DAWH (70 points), UBL (60 points), DGKC (38 points), and TRG (35 points).

The sectors which contributed negatively were pharmaceuticals (22 points), commercial banks (18 points), OMCs (12 points), food and personal care products (6 points), and cable and electrical goods (5 points).

Meanwhile, scrip-wise negative contributions came from MEBL (32 points), ENGRO (23 points), HMB (20 points), BAFL (17 points), and PSO (14 points).

Analyst Wasil Zaman at JS Research said KSE-100 had started the week on a positive note followed by partial correction settling.

Cement sales during May-23 witnessed an uptick, indicating a pick-up in construction activity while OMC sales during May-23 witnessed an increase of 11 percent MoM to 1.30 million tons as compared to 1.17 million tons last month.

Nabeel Haroon at Topline Securities said the gain in the KSE 100 index could be attributed to the announcement of board meetings by companies to increase authorised capital, which is expected to be followed up by the announcement of bonus shares in anticipation that there might be an advance tax imposed on company reserves in the upcoming budget announcement for FY24 on June 9, 2023.

A decline in political noise and statements by government representatives regarding their resolution to stay in the IMF programme also provided support to the market.

During the week, prices for petrol and diesel were cut by Rs8/litter and Rs5/litter, respectively.