Talks with IMF in focus as stocks end week with 2pc gain

Pakistan's stock market closed higher in the outgoing week with a 2 percent increase in benchmark index from the previous week, following reports of commitments from friendly countries to provide financial aid. The market is expected to remain focused on talks with the International Monetary Fund (IMF) in the coming week.

The KSE-100 index closed at 41,008 points, up by 802 points WoW. Average volumes arrived at 105 million shares (up by 26 percent WoW), while the average value traded settled at $13 million (up by 74 percent WoW).

“Saudi Arabia and UAE have given assurances to help fund the balance of payments gap, but Pakistan is still short of around $3 billion in commitments either from multilateral or other friendly countries,” stated a report of Brokerage Arif Habib Ltd. “Therefore, the materialisation of said commitments from these countries/multilaterals will help put the IMF program back on track and aid the sentiment at the index.”

The market commenced on a positive note, as the government announced that the UAE had given its commitment for a loan of $1 billion. However, the IMF was still seeking necessary financial assurances from other multilateral organisations for Pakistan to restart the programme, it reported. According to news articles, Pakistan has shared its revised plan to bridge the gap of $6 billion.

The PKR appreciated against USD by PKR 0.94 0.33 percent WoW, closing the week at 283.5/USD.

Foreigners selling was witnessed during the outgoing week, clocking in at $0.3 million compared to a net buy of $1.4 million last week. Major selling was witnessed in all other sectors ($1.0 million) and fertiliser ($0.4 million). On the local front, buying was reported by banks and DFIs ($5.5 million), followed by individuals ($1.6 million).

Muhammad Waqas Ghani at JS Research said the key performing sector during the week was fertiliser (3.8 percent), mainly on the back of ENGRO, which gained 14 percent WoW. The company announced a hefty cash dividend of Rs40 alongside its 1QCY23 results.

He added that the political noise had persisted during the week as the Parliament refused to provide Rs21 billion to the Election Commission of Pakistan to hold elections in Punjab. On the economic front, Pakistan's current account balance for Mar-2023 clocked in at a surplus of $654 million, which was an 8-year high monthly balance and the third highest monthly balance witnessed in the last 20 years.

A key driver for the surplus was the 27 percent MoM higher remittances - a seasonal uptick witnessed with Ramadan. “Lower/restricted imports also continued to play their role in containing the current account,” he stated.

Sector-wise positive contributions came from fertiliser (442 points), commercial banks (235 points), power generation and distribution (76 points), oil and gas exploration companies (55 points), and tobacco (31 points). Scrip-wise positive contributors were ENGRO (306 points), DAWH (86 points), BAHL (79 points), HUBC (63 points) and UBL (51 points).

The sectors which contributed negatively were technology and communication (99 points), miscellaneous (33 points), and insurance (21 points). Meanwhile, scrip-wise negative contributions came from SYS (105 points), PSEL (31 points), AICL (16 points), MUREB (14 points), and LUCK (5 points).

Nabeel Haroon at Topline Securities said the increase in the benchmark index could be attributed to the ongoing result season where good corporate announcements had garnered investor interest. Major numbers that came in during the week were LSM data showing growth of 16.3 percent MoM, textile exports numbers coming in at $1.3 billion in Mar-23 (down 23 percent YoY and up 8 percent MoM) and 3) and the current account surplus.