Stock market gains mere 0.7% in a volatile week

Pakistan’s stock market closed a volatile week with a modest gain of 468 points or 0.7% week-over-week (WoW) at 65,326 points by Friday. 

According to a note by AKD Research, the market started the week on a positive note and gained 1% on the opening day. However, as the week progressed, profit-taking activities ensued, tempering some of the initial gains. 

As Newly sworn-in Prime Minister Shehbaz Sharif issued immediate directives to his team to fast-track engagement with the International Monetary Fund (IMF) and accelerate privatisation process of loss-making state-owned enterprises (SOEs), it set a stage for an initial positive impetus for the week. 

The IMF also started rolling out new recommendations and is poised to unveil more with the appointment of the finance minister. 

The Shehbaz-led coalition government’s next major task will be to smoothly navigate the second review of the stand-by agreement (SBA), set to expire in April 2024.  

The IMF has shown its readiness to work with the new government and send a mission to Pakistan for a second review of the SBA shortly after the formation of the new cabinet. 

Furthermore, the recent decline in cut-off yields for 3-month papers in the last T-bill auction hints at volatility, suggesting that some players anticipate a rate cut in the upcoming Monetary Policy Committee’s (MPC) meeting on March 18. 

Additionally, remittances for February 2024 totaled $2.25 billion up by 13% YoY, and with a trade deficit of $1.7 billion for the month, the current account is expected to remain controlled.

Market participation also remained subdued, with the daily traded volume averaging 412 million shares compared to 418 million shares in the previous week, down 1.6% WoW. 

On the currency front, the Pakistani rupee held its ground against the greenback, closing at PkR279.04/US$, up by 0.06% WoW). 

Other major news flows during the week included; Pakistan’s debt surged 6%  in seven months of the ongoing fiscal year FY2024. The State Bank of Pakistan (SBP) injected Rs 8 trillion into the market to ease liquidity woes. 

Bank deposits surged 21.7% YoY in February on record-high interest rates and remittances. Cement dispatches fell 19.22% to 3.26MT YoY and Pakistan’s textile exports hit $1.41 billion in February, up 20% YoY. 

Sector-wise, transport, refinery, and Investment banks and securities companies were amongst the top performers, up 20.4%, 11.0%, and 6.6% respectively. 

On the flip side, tobacco, modarabas, and textile weaving companies were amongst the worst performers with a weekly decline of 4.9%, 2.7%, and 2.6% respectively. 

Flow-wise, major net selling was recorded by companies with a net sale of $6.8 million. Foreign investors absorbed most of the selling with a net buy of $6.3 million. 

Company-wise, top performers during the week were NRL whose share price increased by 23.5%, DAWH by 13.5%, CNERGY by 13.2%, PAEL by 11.4%, and PSX by 11.4%, while top laggards were SML with down 7.1%, FCEPL by 4.5%, PAKT by 4.5%, MEBL by 3.5% and SHFA by 3.2%.

AKD Research forecasted that the upcoming MPC meeting will remain in the limelight. Although with prevailing consensus of the status quo, the market would likely remain largely unaffected as this expectation is already priced in. 

However, if MPC cuts rates surprisingly, it could unlock funds for debt-heavy cyclical sectors. 

Additionally, the imminent announcement of the federal cabinet in the coming week holds significance, with progress on the IMF’s SBA third tranche as a near-term focal point and a potential positive in sight.