Pakistan Stock Exchange Posts Lackluster Movement – OpEd
The market experienced volatility during the week ended on May 24, 2024 due to a lack of progress in negotiations between the Pakistan Government (GoP) and the International Monetary Fund (IMF) regarding the staff level agreement. Despite the talks, both the parties denied officially labeling the discussions as negotiations, contributing to uncertainty and fluctuations in the market.
However, Friday saw news of progress on a new EFF program emerged, boosting market confidence and leading to the KSE-100 Index achieving its highest-ever closing. This positive development counteracted previous market volatility, signaling optimism among investors regarding the economic outlook and financial stability. Overall, the benchmark index closed at 75,983 points on Friday, with a gain of 640 points or 0.85%WoW.
Further, SPI weekly inflation remains consistently on downward trend as per recent readings, suggests a slowing down of CPI data for the current month.
Yields in the mid-week PIB auction also declined slightly.
Positivity soared with news of the forthcoming UAE’s pledge of a US$10 billion investment.
Negotiations regarding Reko Diq deal between Pakistan and Saudi investors gained ground, added to the optimism.
Additional revenue measures are being proposed by the authorities by adding 18% sales tax on various zero-rated and exempted goods in the upcoming budget.
Overall, average trading volumes were up by 0.7%WoW, clocking in at 558.18 million shares, as compared to 554.51 million shares traded in the earlier week.
On the currency front, PkR remained flat WoW to close at 278.21.
Other major news flows during the week included: 1) IMF unsatisfied with Pakistan’s steps of bringing real estate into tax net, 2) UN projects Pak economy to grow by 2pc in 2024, 3) Pakistan’s current account records surplus of US$491 million in April and 4) Nepra questions 25% proposed hike in ‘PPP’.
Power Generation & Distribution, Leather & Tanneries, Tobacco, Commercial Banks and Technology & Communications were amongst the top performing sectors, while Sugar & Allied Industries, Automobile Parts & Accessories, Transport, Modarbas and Refinery were amongst the worst performers.
Major net selling was recorded by Foreigners with a net sell of US$12.08 million. Banks/DFI absorbed most of the selling with a net buy of US$10.44 million.
Top performing scrips of the week were: SCBPL, KEL, NPL, SRVI and SHFA, while laggards included: THALL, NRL, DAWH, PSEL and SEARL.
The market is anticipated to remain focused on FY25 budget-related news in the near term. Overall, some profit-taking can be expected with the index hovering at its record high.
With foreign buyers consistently purchasing, the rally is expected to continue amidst the market’s attractive valuations. Furthermore, the upcoming Monetary Policy Committee, scheduled just after the budget, will also be in the limelight.
Despite real interest rates being significantly positive, new taxation measures could pose a risk to the inflation outlook and possible start of monetary easing.
