PSX surges for 3rd week on political clarity, IMF statement

KARACHI
Pakistan Stock Exchange (PSX) remained on an upward slide for the third consecutive week, with the benchmark KSE-100 Index gaining 468.07 points (+0.72 percent) to close the week at 65,793.75 points.
The main factors behind this gain were formation of a new government, which ended political uncertainty in the country, and positive statements from the International Monetary Fund (IMF). Moreover, Pakistan’s bonds rallied in the international market and inflation came down to 23.1 percent in February from 28.3 percent a month ago. Those positive factors provided the required trigger to the stock market.
During the week under review, the bourse turned towards north on Monday and gained 626 points. The experts said that buying came as political volatility in the country cooled off, as Shehbaz Sharif was elected a day earlier as the prime minister of Pakistan for a second term by securing 201 votes. Stocks faced pressure from economic headwinds on Tuesday and lost over 200 points as market players were worried about the future course of the economy.
The KSE-100 index remained under selling pressure on Wednesday and Thursday too and shed 69 points and 53 points respectively, because of doubts about potential negotiations with the IMF for a new loan programme of $6-8 billion. The stocks endured highly volatile trading and closed slightly lower owing to fears about economic recovery and the cautious stance ahead of the monetary policy announcement.
However, the benchmark index modestly rose by 190 points on Friday where investors cheered the IMF’s willingness to negotiate a new programme to help Pakistan address its economic woes.
According to a note by AKD Research, the market started the week on a positive note and gained one percent on the opening day. However, as the week progressed, profit-taking activities ensued, tempering some of the initial gains.
As newly sworn-in Prime Minister Shehbaz Sharif issued immediate directives to his team to fast-track engagement with the International Monetary Fund (IMF) and accelerate privatisation process of loss-making state-owned enterprises (SOEs), it set a stage for an initial positive impetus for the week.
The IMF also started rolling out new recommendations and is poised to unveil more with the appointment of the finance minister. The Shehbaz-led coalition government’s next major task will be to smoothly navigate the second review of the stand-by agreement (SBA), set to expire in April 2024. The IMF has shown its readiness to work with the new government and send a mission to Pakistan for a second review of the SBA shortly after the formation of the new cabinet.
Arif Habib Limited (AHL) wrote that the market continued its bullish momentum during the week amid revival of investors’ confidence on the back of formation of the new government. On the economic front, the government raised Rs527 billion through the auction of Market Treasury Bills. Furthermore, textile exports climbed 20% YoY in February 2024, reaching $1.4 billion, while remittances increased 18% YoY to $2.25 billion. In addition, the State Bank of Pakistan’s (SBP) reserves fell $54 million to $7.9 billion. Pakistani rupee closed at 279.04 against the US dollar, appreciating Rs0.15, or 0.05% WoW.
Sectors making positive contributions to the market were oil and gas exploration (217 points), refinery (105 points), fertilizer (76 points), power generation and distribution (61 points) and cement (61 points). On the flip side, tobacco, modarabas, and textile weaving companies were amongst the worst performers with a weekly decline of 4.9%, 2.7%, and 2.6% respectively.
Foreign buying continued during the week under review, which came in at $6.3 million compared to net buying of $10.4 million last week, AHL added.