Stocks to track IMF talks; rupee risks remain

Stocks will keenly look for a cue from Pakistan and International Monetary Fund (IMF) negotiations, while a deepening currency crisis may dampen sentiment next week, traders said.

The KSE-100 Shares Index, the benchmark of Pakistan Stock Exchange (PSX), in the outgoing week closed at 45,578 points, gaining 757 points, up 1.7 percent week-on-week.

“We expect the market to remain positive in the upcoming week,” said a report of Arif Habib Limited, a brokerage house.

“With IMF and Pakistan expected to reach agreement soon, the investor sentiment is anticipated to remain buoyant.”

Moreover, with the ongoing result season, certain sectors and scrips were expected to stay under limelight; however keeping in view concerns over inflation and devaluation of rupee against greenback, investors were expected to have a cautious approach, the brokerage said.

Average volumes clocked in at 299 million shares, down 13 percent week-on-week, while average traded value settled at $64 million, down 10 percent week-on-week.

Foreign selling was recorded at $7.3 million compared to a net sell of $13.3 million last week.

Major selling was witnessed in the fertiliser ($4.5 million) and commercial banks ($3.8 million). On the local front, buying was reported by insurance companies ($4.6 million) followed by other organisations ($2.5 million).

The market commenced on a negative note this week given the uncertainty over the outcome of Pakistan-IMF talks tagged with surge in petroleum prices raising concerns over inflation.

The market sentiment changed after Finance Minister Shaukat Tarin informed that talks with IMF were moving in the positive direction, with staff-level agreement expected to be reached soon. Alongside this, the current account deficit for September 2021 narrowed by 24.5 percent to $1.1 billion month-on-month, fueling the positive momentum.

On the flipside, continuous drop in PKR/USD parity to Rs174 (all-time high exchange rate), reduction in central bank reserves by 8 percent week-on-week to $17.5 billion and FATF’s retaining Pakistan on grey-list in its plenary meeting, kept the index in check.

AKD Research in a note said Financial Action Task Force (FATF) in an unsurprising move retained Pakistan amongst Jurisdictions under Increased Monitoring, commonly known as the “Grey List”.

The message was similar to previous ones of encouragement on reforms undertaken by the authorities while calling the government to meet extended requirements, the brokerage said.

It said as per the FATF standards, Pakistan seems to have achieved compliance with majority of the 40 recommendations under MER Evaluation Criteria opening up prospects for improvement in effectiveness ranking, the brokerage said. “Hence, a strong possibility exists in our view for Pakistan to elevate itself from the existing group in the medium run, benchmarking our timeline to recent up-gradation of Mauritius,” AKD Research said.

Sector-wise positive contributions came from commercial banks (463 points), cement (184 points), oil & gas exploration companies (137 points), fertiliser (107 points), and insurance (42 points).

Scrips that supported the index included HBL (187 points), UBL (150 points), ENGRO (99 points), LUCK (72 points), and MCB (64 points).

Sectors that contributed negatively included technology and communication (155 points), and food and personal care products (31 points). The major laggards were TRG (113 points), PSO (27 points), and SYS (26 points).