IMF loan talks key to sustaining stocks' uptick

KARACHI: Stocks closed marginally higher in the outgoing week, and the continuation of this positive trend hinges on a fruitful outcome of the ongoing negotiations with the International Monetary Fund (IMF) regarding a new loan package, analysts said.

"With the successful staff-level agreement of the IMF’s SBA (stand-by agreement) program for the final tranche, the government initiated talks with the IMF for an EFF program, and any developments in regard to this will bolster positive momentum at the market," said brokerage Arif Habib Ltd in a weekly note.

The market closed at 65,152 points, increasing by 335 points or 0.52 percent week-on-week.

Average volumes reached 295 million shares (down by 13 percent week-on-week), while the average value traded settled at $40 million (down 4 percent week-on-week).

Foreign buying continued this week, clocking in at $2.0 million compared to a net buy of $2.7 million last week.

Major buying was witnessed in commercial banks ($0.8 million) and the exploration & production sector ($0.6 million). On the local front, selling was reported by companies ($9.0 million) followed by banks/DFIs ($5.0 million).

Sector-wise, positive contributions came from the fertilizer sector (475 points), commercial banks (309 points), paper & board (34 points), automobile assemblers (29 points), and tobacco (21 points). Scrip-wise, positive contributors were DAWH (212 points), MEBL (172 points), FFC (164 points), NBP (105 points), and MCB (77 points).

Meanwhile, the sectors that negatively contributed were cement (244 points), oil & gas exploration companies (156 points), technology & communication (40 points), refinery (30 points), and food & personal care products (24 points). Scrip-wise, negative contributions came from PPL (117 points), OGDC (115 points), HBL (84 points), SYS (77 points), and LUCK (76 points).

Analyst Muhammad Waqas Ghani at JS Research said that the market experienced volatility throughout the week, with the initial three sessions concluding positively before profit-taking dominated the final two trading sessions.

"The focal point this week was the IMF's conclusive assessment of the $3 billion SBA, marked by the signing of a staff-level agreement," he said.

The newly elected government reaffirmed its unwavering dedication to meeting all structural benchmarks and indicative targets set forth by the IMF.

Another notable event of the week was the State Bank of Pakistan's monetary policy statement, wherein the SBP opted to maintain the policy rate at 22 percent for the fifth consecutive time, holding it steady at this level since July 2023, reasoning that current inflation remains high and the outlook leans towards unfavorable risks, despite the recent disinflation trend.

On the opening bell of the week, the market remained mixed as investors maintained a careful stance while they awaited the monetary policy announcement. Following the MPC’s announcement of an unchanged policy rate of 22 percent and the signing of the staff-level agreement with the IMF, the market sentiment revived.

According to Topline Securities’ weekly review, the benchmark index increased by 0.5 percent on a week-on-week basis, which can be attributed to buying in the insurance sector during the week (net buy of $24.13 million as of Thursday’s close). The current account reported a surplus of $128 million in February, compared to a deficit of $303 million in the previous month (January). Additionally, the SBP’s foreign exchange reserves climbed up by $105 million, crossing the $8.0 billion mark.

According to the latest PBS report, large-scale manufacturing posted an increase of 1.8 percent year-on-year in January, marking positive year-on-year growth for the second consecutive month.

Furthermore, the cut-off yields on T-bills in the recent auction jumped compared to the previous auction, with the 3M/6M/12M cut-off yields clocking in at 21.7 percent, 20.4 percent, and 20.9 percent, respectively.