Stocks seen mixed on IMF programme revival

Stocks had the worst week of this fiscal as regulators started slashing stimulus to stabilise economy, spooking investors; however, resumption of IMF programme might keep the market mixed, traders said.

Stocks lost 1,563 points or 3.4 percent to close at 45,074 points week-on-week.

Arif Habib Ltd, a brokerage, in a report said with the government making all-out efforts to restrict imports, tax collection ( a silver lining in the domestic economic cloud at the moment), might also be hurt.

“The sentiment may once again be tested with the government proposing a hike in gas/electricity tariffs,” the brokerage said, adding, “However resumption of the IMF programme next month could provide a breather”.

Average volumes clocked in at 384 million shares, down by 4 percent week on week, while average traded value settled at $73 million, down 18 percent week-on-week.

Foreign buying this week dropped to $6.7 million from a net sell of $10.9 million last week. Major buying was witnessed in other sectors ($6.1 million), technology and communication ($3.0 million), and oil and gas marketing companies ($1.8 million).

On the local front, individuals led the selling ($7.5 million) followed by companies ($3.5 million).

The market weakened during the week amid rising demand and the upcycle in international commodities, exacerbating the deficit on the external front, raising red flags over future CPI readings and mounting pressure on the rupee, while State Bank of Pakistan (SBP) commenced tapering its monetary stimulus.

A 25bps hike in the policy rate, shifting the focus from prioritising growth to now ensuring sustainability, was put into effect to stop the economy from overheating. Furthermore, the government also adopted other measures to curtail demand such as tightening regulatory and consumer financing policies for auto consumers. Hence, investors remained on the edge.

Sector-wise negative contributions came from technology (275 points), cement (196 points), commercial banks (148 points), fertiliser (137 points), and exploration and production (134 points).

Stocks that contributed negatively included TRG (142 points), SYS (124 points), HBL (71 points), OGDC (70 points), and PPL (55 points).

Sectors that supported the market were miscellaneous (41 points), and chemical (3 points).

Meanwhile, stock-wise support came from PSEL (46 points), MCB (18 points), and BAFL (15 points).

Other major news of the week included: EU extended GSP plus status with six new conventions, ADB forecast Pakistan's economy to grow at 4 percent in FY22, Pakistan to issue new international Sukuk as soon as Oct, Punjab issued 22 NOCs for setting up cement factories, and government proposed up to 37 percent hike in gas tariff.

Economists are of the view a weak economy would not only affect the stocks but also the lives of the masses.

“We are facing a huge trade gap between imports and exports, which is alarming,” said Ateeq Ur Rehman, economic and financial analyst.

“Trade deficit is widening day by day. There is an urgent need of taking immediate measures to lessen the gap between imports and exports.”

Talking about the strict measures being taken by the State Bank to regularise auto financing, Rehman said it would benefit the economy but “We not only need stringent consumer/auto financing policies but also an encouragement to motorcycle financing or bike Ijaras”.