The Pakistan Stock Exchange experienced a range-bound trading week as the benchmark KSE-100 index swayed between positive and negative territories, driven by a mix of encouraging and discouraging developments.
Subsequently, the KSE-100 index closed the week with a marginal gain of 73 points at 40,150. Market participants mostly remained sidelined as jittery investors weighed the impact of growing political chaos, economic uncertainty and the persistent rupee depreciation.
Earlier, the week kicked off with a decline as the KSE-100 index dipped over 200 points in the first trading session in the backdrop of anticipated Supreme Court verdict in the Punjab chief minister election case. Moreover, the market came under pressure due to rupee depreciation, which shattered investors’ confidence.
However, the KSE-100 index in the next two sessions inched up marginally to close in the green but remained under pressure and stood below the 40,000-point mark.
The index staged a comeback with over 300 points as the talk of settlement amongst the country’s political leadership boosted investors’ confidence. A healthy buying activity was observed and value buying lifted the index above the 40,000 mark. Furthermore, a lower-than-expected current account deficit was also cheered by the market players.
The final session of the week ended on a negative note as KSE-100 recorded profit-taking, which took the index on the downward trajectory despite the rupee’s recovery. The index closed the week slightly positive and settled at 40,150, up 73 points week-on-week.
“Political uncertainty and deteriorating macroeconomic indicators kept the market range bound as the benchmark KSE-100 index closed the week on a slightly positive note at 40,150, up 73 points week-on-week,” said JS Global analyst Faisal Irfan. Volumes declined 8.1% with an average of 150 million shares traded per day during the week. Key underperformers were auto (-5
4%), Fertilizer (-4%), Essential Oil (-1.9%), Technology (+4.7%), Fiber (+3.8%), and Ginkgo (+1.6%) showed the best results.
The week began with a political uproar over the election of Hamza Shehbaz as Punjab’s highest minister. However, by a later Supreme Court ruling, Parvez Elahi was declared CM of Punjab.
Economically, July was the worst month in 50 years as the Pakistani rupee depreciated 14% against the US dollar, further worsening macroeconomic performance. In addition, the current account deficit in June was $2.3 billion, up 39% from the same period last year and 59% from the previous month.
The central bank’s foreign exchange reserves also fell by $754 million to $8.6 billion.
S&P Ratings Agency revised its long-term credit rating outlook for Pakistan from ‘stable’ to ‘negative’ due to worsening macroeconomic indicators. On the news front, the base electricity rate has been revised upwards of Rs 7.91 per unit.
Moreover, an automaker halted production due to delay in import of CKDs, said the analyst.
Arif Habib Limited, in its report, said that the market commenced on a negative note during the week as political and economic uncertainty kept investors on edge.
Moreover, Pakistani rupee continued its free fall against the US dollar (reaching an all-time low at Rs239.94) amid scepticism over the release of IMF loan tranche.
Volatility became more evident as the current account deficit climbed up by 39% year-on-year during June 2022, to stand at $2.3 billion. The sentiment turned positive, however, after the finance minister reiterated that all prior actions had been undertaken for the revival of IMF programme. SBP also reiterated the statement by the Finance Minister and dismissed allegations of default on global payments in the near future. Fitch and Moody’s also expressed optimism that the IMF will pay $1.2 billion soon. However, S&P Global took control of the exchange by downgrading Pakistan’s credit outlook from neutral to negative. The market closed at 40,150 points, up 73 points (+0.18%) over the week.
By industry, technology (176 points), banking (138 points), exploration and production (58 points), chemical industry (37 points), and CHI (16 points) were in order.
On the other hand, sectors that made a negative contribution were fertilizer production (231 points), automobile assembly (73 points), and cement production (35 points).
Meanwhile, TRG Pakistan (132 points), Lotte Chemical (51 points), Pakistan oil fields (47 points), Bank Alfalah (46 points) and Habib Bank (30 points) also contributed positively to the share price.
However, negative contributions were made by Engro Fertilizers (88 points), Engro Corporation (84 points), Indus Motor (45 points) and Fauji Fertilizer Company (44 points). Overseas purchases for the week totaled $570,000, up from $1.64 million in net purchases last week. Large purchases were made in technology ($3 million) and textiles ($64 million). In the region, individuals ($0.4 million) reported sales, followed by insurance companies ($1.78 million).
Published in The Express Tribune, July 31st, 2022.