Stocks likely to move up amid key policy rate cut expectations

KARACHI: Stocks increased above 5,000 points, or around 5.0 per cent, and remained the top-performing market in the world in terms of dollar returns for the second consecutive week. The market is likely to keep the upward momentum amid expectations of a higher cut in the key policy rate next week.

“The market participants are expected to closely monitor the MPC meeting on December 16 (which will mark the final MPC of CY24),” said brokerage Arif Habib Ltd. “We project a 200bps cut in the monetary policy rate, arriving at 13 per cent. Hence, the KSE-100 index is expected to continue with the bullish streak.”

The market remained buoyant throughout the week, with the KSE-100 index crossing the 115,000 points mark. The bullish momentum prevailed amid positive economic indicators coupled with expectations of a rate cut in the upcoming monetary policy committee meeting in the upcoming week.

The market closed at 114,302 points, significantly up by 5,248 points or 4.8 per cent week-on-week. With this, Pakistan continues to be the world’s best-performing market in terms of USD-based return for the second consecutive week.

Average volumes arrived at 1,362 million shares (down 19.1 per cent WoW), while the average value traded settled at $218 million (up 10.2 per cent WoW).

Foreigner selling continued during this week clocking in at $0.9 million compared to a net sell of $14.2 million last week. Major selling was witnessed in fertiliser ($3.7 million) followed by E&P ($3.6 million). On the local front, buying was reported by funds ($40.9 million).

Sector-wise positive contributions came from oil and gas exploration (3,175 points), fertiliser (1,767 points), oil and gas marketing companies (589 points), cement (432 points) and technology and communication (403 points). Scrip-wise positive contributors were MARI (1,921 points), FFC (1,193 points), OGDC (592 points), PPL (585 points), and PSO (420 points).

The sectors that contributed negatively were commercial banks (2,292 points), automobile parts (18 points), and cable and electrical goods (16 points). Scrip-wise negative contributions came from UBL (465 points), MEBL (392 points), BAHL (350 points), MCB (329 points) and HBL (232 points).

Analyst Nabeel Haroon at Topline Securities said the KSE 100 index gained 4.83 per cent on a WoW basis making it the eighth consecutive positive closing as expectations of an interest rate cut in the upcoming monetary policy meeting kept the investor interest robust, and continuous buying by mutual funds provided further stimulus to the market.

Wadee Zaman, an analyst at JS Research, said Pakistan’s remittance inflows continued to remain elevated in November, clocking around the $3 billion mark with a 29 per cent year-on-year increase. “With the current run-rate, the $35 billion annual target projected by the finance minister earlier this week appears attainable,” he said.

In the recent T-bill auction, the government raised Rs1,256 billion against a target of Rs1,200 billion, with yields decreasing by up to 100bps across different tenors. The finance minister said that the government’s external financing gap had been met for the current year, leaving no urgency to tap international financial markets until Pakistan’s credit rating improves.

During the week, the federal cabinet approved settlement agreements with eight bagasse-fired IPPs, this initiative is expected to result in a reduction in electricity prices.

Furthermore, passenger car sales recorded a significant jump of 62 per cent YoY in November. Meanwhile, the banking sector’s ADR increased to 47.8 per cent in November compared to 44.3 per cent in October. SBP reserves climbed up by $13 million to $12.1 billion.