The stock market is expected to maintain its positive momentum as global market concerns diminish and macroeconomic indicators show stability. The anticipated approval from the IMF Executive Board later this month is expected to further support market confidence, according to a report from AKD Securities.
The KSE-100 Index displayed mixed movements throughout the week but ultimately posted a modest gain of 0.4% on a week-on-week basis, closing at 78,570 points.
The week began with turbulence, largely due to concerns over Japan’s interest rate hike affecting global markets. However, a late-week recovery in the Exploration and Production (E&P) sector, driven by a surprising payout from MARI, helped lift market sentiment. Investor confidence was also bolstered by debt rollover commitments that align with IMF prerequisites, ahead of the expected Executive Board meeting.
The latest auction of T-bills showed a drop in yields by 50-54 basis points, indicating investor expectations of rapid rate cuts in upcoming Monetary Policy Committee meetings. This decline in T-bill yields led to KIBOR rates reaching 18-month lows.
Additionally, remittances for July 2024 were recorded at $3.0 billion, a 45% increase year-on-year, improving the outlook for the current account balance.
The energy sector remained a focal point, with rising power prices prompting the government to form a task force on energy. Plans were announced to retire or gradually phase out 15 Independent Power Producers (IPPs).
The Economic Coordination Committee (ECC) directed the relevant ministry to develop a fertilizer policy aimed at addressing production, pricing, and gas provision concerns, which may lead to unified gas prices across the industry.
Market participation increased by 38% on a week-on-week basis, with average daily traded volume rising to 493 million shares compared to 358 million shares the previous week. The Pakistani Rupee remained stable against the US dollar, closing the week at 278.55 per dollar.
Key developments during the week included a 7% decline in cement sales due to slowing economic activity, a $51 million increase in SBP foreign exchange reserves, optimistic foreign investment expectations post-IMF deal, and the government’s consideration of raising GST on tractors to 14%. Woollen, textile weaving, and textile spinning sectors were among the top performers, while vanaspati & allied industries, property, and fertilizer sectors saw declines.
In terms of market flows, major net selling was recorded by mutual funds, while individuals were the primary buyers. Top-performing companies included YOUW, BNWM, MARI, SNGP, and APL, while PIBTL, AKBL, BAHL, FFC, and ATRL were among the laggards.
According to the brokerage report, the market is expected to sustain its positive trend as global market concerns ease and macroeconomic indicators remain supportive. The anticipated IMF Executive Board approval is likely to further boost momentum, with sectors benefiting from monetary easing and structural reforms expected to stay in focus.
However, the report indicated that the modest economic recovery may limit the upside for cyclical stocks. Key picks include OGDC, PPL, MARI, MCB, UBL, MEBL, FFC, LUCK, FCCL, and INDU.
