The stock market is anticipated to sustain positive momentum as the new fiscal year commences with the approval of the federal budget for FY2024-25 and clarity on new budgetary measures has emerged, according to a note by the AKD Research.
The focus will now shift to upcoming discussions with the IMF regarding the next Extended Fund Facility (EFF) program.
According to the brokerage report, the benchmark KSE-100 index experienced a subdued week ended on June 28, 2024, declining by 365 points (0.46% WoW), primarily due to weakness in the banking sector following news of the continuation of the Advances-to-Deposit Ratio (ADR)-based tax.
Trading volumes also stood lower, averaging 356 million shares for the week, down 13% WoW. The futures rollover incidence, coupled with it being the last week of the fiscal year, contributed to the lackluster performance.
Several important data points emerged during the week. The Current Account Deficit (CAD) came in at $270 million, below expectations of a slightly positive balance, primarily due to the State Bank of Pakistan (SBP) clearing the backlog of overdue outward dividend repatriations.
Additionally, monthly Foreign Direct Investment (FDI) clocked in at $271 million, up 95% YoY, bringing the 11MFY24 FDI total to $1.73 billion, a 15% YoY increase.
The Federal Budget for FY25 was approved in the National Assembly on Friday, with several amendments to the previously presented finance bill. Key changes included the introduction of a 15% Federal Excise Duty (FED) on sales by builders/developers, continued concessions on Hybrid Electric Vehicle (HEV) imports, and increased FED on cement.
On the external front, the SBP’s foreign exchange reserves fell by $239 million on a weekly basis, ending at $8.9 billion. The domestic currency strengthened slightly against the US dollar, ending the week at PKR278.34/USD, up 0.06% WoW.
During the week, sectors such as Tobacco, Jute, and Vanaspati & Allied were among the top performers, up 6.5%, 4.3%, and 4.2% WoW, respectively. Conversely, ETFs, Refinery, and Property sectors were the worst performers, with declines of 9.7%, 4.4%, and 3.7% WoW, respectively.
Flow-wise, major net selling was recorded by mutual funds (net sell: US$5.8 million) and other organizations (net sell: US$2.2 million). Brokers and companies absorbed most of the selling, with a net buy of US$4.9 million and US$1.5 million, respectively.
Top-performing companies during the week included MUREB (+12.8% WoW), FABL (+11.8% WoW), PAKT (+11.2% WoW), UNITY (+10.6% WoW), and HGFA (+9.4% WoW). The top laggards were YOUW (down 7.5% WoW), MCB (down 7.5% WoW), EPCL (down 6.6% WoW), CNERGY (down 5.9% WoW), and CEPB (down 5.8% WoW).
Other important news flows during the week included the World Bank approving $535 million for social protection and livestock development, no cut in gas tariff from July 1st, Finance Minister Aurangzeb issuing warnings to retailers, the government raising Rs908 billion in new debt via T-Bills and Pakistan Investment Bonds (PIBs), and foreign investors repatriating a record $918 million in profit and dividend in May.
With the approval of the Federal Budget, clarity on new budgetary measures has emerged, and the market is anticipated to sustain positive momentum as the new fiscal year commences.
Brokerage firm forecasted that the focus will now shift to upcoming discussions with the IMF regarding the next Extended Fund Facility (EFF) program, with a keen eye on their assessment of the approved budget. Additionally, the anticipated easing of inflation figures for May 2024 is expected to reinforce positive market sentiment further.
