Stocks likely to witness mixed reactions next week

KARACHI: Stocks closed slightly lower amid consolidation during the outgoing week, while the market is expected to witness mixed reactions next week. The momentum is likely to increase amid the ongoing talks with the IMF for an EFF programme. However, any increase in inflation can affect the market movement.

The benchmark KSE100 index increased 3.42 per cent in June and posted a record increase of 89 per cent (94 per cent in dollar terms) in the fiscal year 2024 -- the highest in the last two decades.

“With the onset of the new fiscal year, the IMF’s EFF programme will be closely monitored by market participants, which is anticipated to boost the market’s momentum,” stated brokerage Arif Habib Ltd. “Additionally, investors will be following inflation for June 24, as it is expected to inch up slightly compared to last month.”

The market remained range-bound during the week as selling pressure was witnessed at the KSE-100 index, although investors remained optimistic about the new IMF programme.

The market closed at 78,445 points, decreasing by 366 points or 0.46 per cent WoW. Average volumes arrived at 356 million shares (down 23.0 per cent WoW), while the average value traded settled at $50 million (down 32.3 per cent WoW).

Foreign buying was witnessed during the week, clocking in at $2.5 million compared to a net buy of $0.6 million last week. Major buying was witnessed in power ($2.5 million) and commercial banks ($0.8 million). On the local front, selling was reported by mutual funds ($5.8 million), followed by other organizations ($2.2 million).

Sector-wise negative contributions came from commercial banks (631 points), technology & communication (79 points), automobile assemblers (72 points), textile composites (43 points), and refineries (40 points). Scrip-wise negative contributors were MCB (242 points), UBL (147 points), MEBL (113 points), MTL (65 points), and PPL (53 points).

Meanwhile, the sectors that mainly contributed positively were fertiliser (354 points), power generation & distribution (144 points), and food and personal care products (57 points). Scrip-wise positive contributions came from FFC (248 points), HUBC (148 points), FABL (67 points), EFERT (40 points), and MARI (40 points).

Analyst Muhammad Waqas Ghani at JS Research said FY2024 concluded with the KSE-100 achieving its highest returns in 21 years.

The week began with SBP data revealing Pakistan’s current account balance ended a three-month surplus streak in May 2024, recording a deficit of $270 million. This widened the 11MFY24 CAD to $464 million. While the May data reduces the possibility of a current account surplus for the year, it cannot be ruled out.

Certain amendments to the proposed finance bill were under discussion throughout the week. The uncertainty ended on the last trading day of the week when the finance bill was approved with the amendments. Key amendments include: a decrease in the cap on PDL on petroleum products from Rs80/litre to Rs70/litre; an extension of sales tax exemption for tribal areas for one more year -- up to 30th June, 2025; a continuation of concessionary GST on hybrid electric vehicles (HEVs) until FY25; an increase in FED on cement; an increase in taxes for real-estate developers and sellers; and a revision to include additional income tax for persons earning more than Rs10 million/annum.

Though the market decreased slightly on a week-on-week basis, it increased 3.42 per cent in June (month-on-month). Analyst Nabeel Haroon at Topline Securities said that this MoM positivity in the market can be attributed to the FY25 budget, which was better than market expectations as the tax rate on dividends and capital gain from the stock market for filers was maintained, whereas the tax rate on other asset classes was increased.

He said Fitch’s statement that the increase in taxation measures in the budget has increased the likelihood of securing an IMF deal also provided stimulus to the market.

Furthermore, the SBP raised Rs131 billion in the PIB auction and Rs776 billion in the T-bill auction against a target of Rs190 billion and Rs450 billion, respectively. The repatriation of profits and dividends in Pakistan increased by 15.4x YoY to $918 million in May 24, which is the highest-ever monthly repatriation.

Additionally, SBP reserves depicted a decline of $239 million or 2.61 per cent WoW to $8.9 billion. The Pakistani rupee appreciated by Rs0.17 or 0.06 per cent WoW, arriving at 278.3 against the greenback.