Weekly wrap: PSX breaches 66k barrier, PKR gains more ground amid positive economic outlook

IMF praises the actions and policies of the Pakistani authorities which resulted in an overall improvement in the economic situation

The Pakistan Stock Exchange (PSX) continued its bullish momentum, reaching new highs in the week ending on Dec 8, 2023. The benchmark KSE-100 index gained 7.35% week-on-week (WoW) to close at 66,224 points, the highest level in its history. The Pakistani rupee also appreciated against the US dollar by 0.39% WoW to settle at 283.87.

According to a report by AKD Securities Limited, the stock market was driven by positive news regarding the country’s economic prospects. The International Monetary Fund (IMF) expressed optimism about Pakistan’s economic recovery, projecting an increase in the State Bank of Pakistan (SBP)-held reserves to $9.0 billion by the end of the fiscal year.

Bahador Bijani, the Executive Director of IMF, praised the actions and policies of the Pakistani authorities, saying that they have improved the economic situation and that the future outlook for the country is very bright.

The market also welcomed the finalisation of the Bilateral Investment Treaty (BIT) agreement and the increased likelihood of a similar outcome for the Free Trade Agreement (FTA) with the Gulf Cooperation Council (GCC).

These agreements are expected to boost trade and investment flows between Pakistan and the Gulf countries, which are among its major economic partners.

Another positive development was the inclusion of Pakistan in the IMF’s executive board meeting on January 11, 2024, which raised hopes for the second loan tranche The IMF program is crucial for Pakistan to access external financing and maintain macroeconomic stability.

As per the report, the upbeat sentiment was reflected in the significant surge in participation, with the weekly average traded volume totaling 1.02 million shares, up 64% WoW. The foreign investors also showed confidence in the Pakistani market, as they recorded a net inflow of $11.2 million during the week. The foreign interest was mainly concentrated in the refinery, oil and gas, and power sectors.

On the currency front, the rupee strengthened against the dollar, as the demand for the greenback eased and the supply increased due to the inflows from the Roshan Digital Accounts (RDA) and the remittances.

However, the SBP-held foreign exchange reserves fell by $237 million to stand at $7.0 billion as of Dec 1, 2023, down 3.3% WoW. The decline was attributed to the external debt servicing and other official payments.

Sector-wise, the refinery sector emerged as the top performer, gaining 18.28% WoW, followed by the oil and gas exploration sector, which rose by 13.96% WoW. The refinery sector benefited from the higher refining margins and the improved demand for petroleum products.

The oil and gas exploration sector was supported by the higher international oil prices and the positive news regarding the BIT and FTA agreements with the GCC.

The woolen sector was the worst performer, losing 8.39% WoW, followed by the textile weaving sector, which dropped by 5.76% WoW. The woolen sector suffered from the lower demand for winter clothing and the higher cost of raw materials. The textile weaving sector faced the challenges of the power outages, the gas shortages, and the rupee appreciation.

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