Stocks eye upward momentum amid expected decline in inflation

KARACHI: Stocks closed slightly lower during the outgoing week, and the market is expected to walk on the upward path amid expectations of declining inflation.

“We project that the market next week will sustain its upward momentum, bolstered by the disbursement received from the IMF later this week and a further decline in inflation, which we believe is expected to reach 7.3 per cent,” said brokerage Arif Habib Ltd. “Moreover, with the ongoing result season, certain scrips are anticipated to be in the limelight amid the expectation of robust results.”

The market remained mixed throughout the week, but the highlight was KSE-100 Index reaching an all-time high, surpassing the 82,000 level. This surge was fuelled by the International Monetary Fund’s approval of the $7 billion Extended Fund Facility (EFF). However, some profit-taking later in the week caused the index to decline.

The market closed at 81,292 points, marking a decrease of 782 points or 0.95 per cent WoW. Average volumes arrived at 391 million shares (down by 16.7 per cent WoW), while the average value traded settled at $61 million (down by 7.9 per cent WoW).

Foreigner selling continued during this week, clocking in at $12.4 million compared to a net sell of $23.2 million last week. Major selling was witnessed in E&P ($6.2 million) followed by fertiliser ($5.2 million). On the local front, buying was reported by mutual funds ($16.2 million) followed by companies ($8.9 million).

The sectors that mainly contributed negatively were power generation and distribution (755 points), oil & gas exploration (348 points), technology & communication (111 points) oil & gas marketing companies (106 points) and textiles (54 points). Scrip-wise negative contributions came from HUBC (595 points), MARI (331 points), PPL (107 points), Engro (95 points), and BAFL (71 points).

Sector-wise positive contributions came from fertilizer (440 points), commercial banks (212 points), automobile parts & accessories (28 points), leather & tanneries (27 points) and pharmaceuticals (20 points). Scrip-wise positive contributors were FFC (435 points), UBL (179 points), BAHL (93 points), OGDC (56 points) and FFBL (55 points).

Analyst Wadee Zaman at JS Research said after reaching an all-time intraday high of 82,906, the KSE-100 lost momentum, ending the week with a WoW decline of 782 points. FTSE outflows continued during the week with foreign selling during the week coming in at $12.5 million.

This week marked a significant milestone as Pakistan’s $7 billion extended fund facility was approved by the IMF executive board with further talks that $1.1 billion will be disbursed immediately as per the prime minister’s office (PMO).

“Prime Minister Shehbaz Shareef met with the IMF managing director (MD) where she commended the reforms undertaken by the government. On the back of IMF news, Pakistan received significant financing assurances from China, Saudi Arabia and the UAE that go beyond the required $12 billion rollovers in FY25,” Zaman said. “Asian Development Bank has also stated that the IMF-backed reform agenda will accelerate Pakistan’s economic growth to 2.8 per cent in FY25.”

The government is also working on a renegotiation agreement with five IPPs, which will soon have a finalized draft aiming to reduce payments to these IPPs. As per the latest update, SBP reserves remained sticky at 26-month high levels, clocking in at $9.5 billion.

Nabeel Haroon, an analyst at Topline Securities, said a dip in points can be attributed to selling by foreign corporates during the week and news that the government wants to scrap contracts with five power plants, indicating that the government has started taking measures to reduce payments to power producers.

Repatriation of profits and dividends in August increased by 188 per cent YoY to $135.6 million. The Pakistani rupee appreciated against the dollar by 0.05 per cent at 277.7.