Weekly wrap: A slight correction for PSX and a boost for PKR

The Pakistan Stock Exchange (PSX) experienced a minor correction in the week ending on December 15, 2023, while the Pakistani Rupee appreciated by 0.22% against the US dollar.

Throughout the week, benchmark KSE-100 swung back and forth in a range of 2,667 points, between a high and a low of 67,094 and 64,427 levels, respectively, before settling the week at 66,130 after losing 0.14%.

The index had been on a historic bull run since September, reaching record highs, but faced some profit-taking and margin calls in the past week.

With an average of 630 million shares worth Rs22.48 billion exchanged, the market turnover was high throughout the week. This represented a 9.52% MoM increase in the number of shares and a 10.54% MoM decrease in the traded value. 

Furthermore, the overall PSX average traded volume (All-Share) increased by 22.24% MoM to 1.25 billion shares worth Rs30.34bn, while the traded value decreased by 9.74% MoM.

The top performing sectors of the week were automobile, transport, and leasing, while the worst performing sectors were leather & tanneries, woollen, and textile weaving. 

The major net sellers were insurance companies, while the major net buyers were foreigners. The top gainers and losers of the week were PTC, BOP, PIBTL, PAEL, and KEL, and HCAR, EFUG, MEBL, GHGL, and NRL, respectively.

The State Bank of Pakistan (SBP) kept the policy rate unchanged at 22%, in line with market expectations, while foreign investors remained bullish on Pakistan, as evidenced by the Saudi Aramco’s deal to acquire 40% of GO Petroleum Ltd. 

The country also expects to receive $4.5 billion from multilateral and bilateral sources, excluding the IMF, in the current fiscal year, which would help meet its external obligations of $6.8 billion. 

The high interest rates also attracted investors to fixed-rate instruments, such as the first ever sukuk auction by PSX, which was oversubscribed by 16 times. The remittances of $2.25 billion in November also supported the current account balance.

According to AKD Research, the outlook for the market remains positive, although the pace of the rally may slow down. The upcoming elections, the robust FDIs, and the active market participation are the key drivers of optimism. 

The research firm urged the investors to maintain long-term positions in fundamentally sound companies, while taking profits in weak entities. The companies with high dividend yields, especially in the banking, energy, and fertilizer sectors, also offer attractive opportunities for accumulation.

On the currency front

The Pakistani rupee also appreciated by 0.22% against the US Dollar, closing at PkR283.25 on Friday. This marks the fifth consecutive weekly gain witnessed by the local unit against the greenback.

The reason for this improvement is the successful staff-level agreement between Pakistan and the IMF on November 16 during the first review of the Standby Agreement (SBA).

The agreement, which awaits the IMF’s Executive Board’s approval, will give Pakistan access to around $700 million or SDR 528 million.

The authorities acknowledge that the Pakistani rupee should be determined by the market to ease external pressures and sustainably rebuild reserves, as inflows from increased regulation and law enforcement normalised import and foreign payments and restored reserves.

To achieve this, they intend to enhance the forex market’s transparency and efficiency and avoid administrative measures to affect the rupee.

The latest trade figures for November also boost the optimism, showing a 13.16% MoM and a 31.72% YoY drop in the trade deficit to $1.89 billion. Exports rose by 7.66% YoY to $2.57bn, while imports fell by 14.47% YoY to $4.46bn.