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Tuesday March 19, 2024

Stock investors eye IMF’s decision to take next move

By Danyal Haris
November 18, 2018

Blue-chip gains led the equity market to a positive trajectory in the outgoing week, but stocks are likely to remain range-bound ahead with an awaited IMF’s decision keeping investors on tenterhooks, dealers said.

“We expect the key trigger for the index will be the deliberations with the IMF (International Monetary Fund) for a fresh funding arrangement,” brokerage Habib MetroFinance Services said in a report. IMF’s decision is expected till November 20.

“Strict requirements on the fiscal reform/elimination of subsidies front and imposition of new taxes will be a key hurdle, but once the details come out the benchmark index should find reasons to register a fresh rally.”

The benchmark KSE-100 Index of Pakistan Stock Exchange rose 0.66 percent or 272 points to close at 41,661 points. Foreigners were net sellers amounting to $24.1 million during the week versus $9.4 million a week earlier. This was the 28th consecutive week of foreign selling. Mutual funds and individuals were net buyers of $9.2 million.

Trading commenced on a negative note partly extended from the previous week as investors were doubtful about the success of the Prime minister’s visit to China. Another round of negotiations between Pakistani and Chinese officials, which did not yield any tangible positive outcome, forced the index to go down.

Index provider Morgan Stanley Capital International (MSCI) reduced Pakistan’s weight to 0.046 percent from 0.10 percent after downgrading Lucky Cement and UBL from its main index to small index and deleted Honda Car and Maple Leaf Cement from the small index. The index, however, rebounded after MSCI announcement on the last two trading days due to domestic financial institutions and high net-worth individuals showing interest, which pushed the index upward.

Top five best performing sectors during the week were commercial banks up 193 points on an expected 100 basis points hike in interest rate in the upcoming monetary policy, cement sector rising 94 points due to three percent decline in international coal prices and chemical sector increasing 42 points on healthy margins.

Sectors that negatively contributed to the index included oil and gas exploration and production down 78 points due to a nine percent slump in international oil prices, technology and communication falling 32 points and food and personal care decreasing 16 points.

“We expect the market to remain range bound given lack of positive triggers ahead,” Arif Habib Securities said. “Unfavourable economic conditions owing to higher current account deficit, depleting foreign exchange reserves and expectation of another rate hike of 100 basis points are also likely to keep investors cautious.”

Any positive announcement from Prime Minister’s visit to Malaysia, which is scheduled from November 20, could provide some confidence to the investors.

BMA Capital Management maintained its liking for the export oriented/dollarised revenue stream- related sectors with minimal leverage.

“Recent weakness in oil prices opened up valuations, warranting a buy stance across E&P (exploration and production) names with cherry-picking in fertilisers, textiles and some heavily battered financial blue-chips,” the brokerage said in a report.