PSX falls 2.61% in a volatile week influenced by political noise: report

Pakistan Stock Exchange (PSX) experienced volatility throughout the week ended on Friday, heavily influenced by political noise, pushing the benchmark index 2,088 points or 2.61% down compared to last week. The benchmark KSE-100 Index ended the week at 78,029 points.   

As per a note by AKD Research, authorities are focusing on other external financing requirements as Pakistan’s agenda is yet to be included in the IMF board meeting. These efforts include getting a possible debt rescheduling from China, especially for independent power producers (IPPs). 

Additionally, the Finance Minister has engaged with global rating agencies, Fitch and Moody’s, aiming for a possible improvement in the country’s credit rating to facilitate capital raising through external sources. 

Furthermore, in the last T-bill auction, yields dropped by 30-56 basis points, indicating market expectations of a 50-100 basis points cut in the policy rates during the upcoming MPC meeting on Monday. 

However, the brokerage house anticipated the MPC to maintain the status quo due to the re-emergence of strong inflationary pressures from food supply disruptions and recently announced revenue measures in the FY25 budget. July 2024 inflation is expected to clock in at 10.96% YoY, compared to 12.57% YoY in the preceding month. 

On the external front, SBP-held forex reserves fell by $397 million on a weekly basis to stand at $9.03 billion as of July 19, 2024.

 With the said volatility in the market, participation decreased by 27.3% WoW, with the average daily traded volume falling to 337 million shared compared to 464 million shares in the previous week. 

On the currency front, Pkr largely remained flat against the greenback throughout the week, closing the week at 278.3 per US dollar. 

Other major events during the week included; 1) Forex reserves fall by $369m, 2) Income estimates slashed to PKR9.1tn, 3) Auto financing shows downward trend for second straight year, 4) Govt plans to pull out of fuel pricing process, giving OMCs free hand, and ) PKR’s REER index falls to 100.11 in Jun’24. 

On the sectoral performance front, Leasing companies, Vanaspati and allied industries, and textile spinning were amongst the top performers, up 9.0%, 4.8%, and 4.3% WoW, respectively. While, ETFs, Investment banks, and Jute were amongst the worst performers with a decline of 18.9%, 8.9%, 7.5% WoW. 

Flow-wise, major net selling was recorded by mutual funds with a net sell of $5.0 million. Foreign investors and insurance companies absorbed most of the selling with a net buy of $4.6 and $4.4 million, respectively. 

Company-wise, top performers during the week were, i) PAKT (up 3.9%WoW), ii) GADT (up 2.5%WoW), iii) JVDC (up 2.2%WoW), iv) FFBL (up 1.8%WoW), and v) LCI (up 1.6%WoW), while top laggards were, i) NCPL (down 11.9%WoW), ii) NPL (down 11.7%WoW), iii) KAPCO (down 9.4%WoW), iv) INIL (down 9.1%WoW), v) FCEPL (down 4.8%WoW).

AKD Research forecasted that the market’s focus will primarily be on the MPC meeting on Monday, with any rate cut to boost investor’s confidence and draw increased attention to the cyclical sector. 

Additionally, the anticipated approval from the IMF executive board next month is likely to support bullish momentum. Sectors benefiting from monetary easing and structural reforms would remain in the limelight.