Stocks likely to stay positive amid hopes of new fund commitments

KARACHI: Stocks closed slightly higher during the outgoing week, and the market is also expected to stay positive during the next week. This optimism is due to a restructuring of loans and hopes for new funding commitments from friendly countries.

“We anticipate the market to maintain its positive trajectory in the coming week,” said brokerage Arif Habib Ltd. “Key developments to watch include progress on the reprofiling of existing debt and securing new funding commitments from Saudi Arabia, the UAE, and China, which are crucial for the approval of the IMF Extended Fund Facility (EFF) programme.”

Moreover, with the ongoing result season, certain scrips are anticipated to be in the limelight amid the expectations of robust results.

The week started on a positive note with the monetary policy committee's (MPC) meeting on Monday. The government announced a policy rate cut of 100bps, bringing the interest rate down to 19.5 per cent. In a further boost to market sentiment, Fitch Ratings upgraded Pakistan’s credit rating from CCC to CCC+ on the back of an improved external funding outlook.

The market closed at 78,226 points, with an increase of 196 points or 0.3 per cent week-on-week. Average volumes arrived at 356 million shares (up by 5.7 per cent WoW), while the average value traded settled at $60.9 million (up by 8.4 per cent WoW).

Foreigner selling was observed during this week, clocking in at $2.2 million compared to a net buy of $4.6 million last week. Major selling was witnessed in foods & personal care ($1.9 million) and fertilizer ($0.6 million). On the local front, buying was reported by insurance ($1.8 million) followed by individuals ($1.5 million).

Sector-wise positive contributions came from fertiliser (417 points), refinery (68 points), power (63 points), E&P’s (58 points) and pharmaceuticals (36 points). Scrip-wise positive contributors were FFC (479 points), POL (70 points), MEBL (49 points), ATRL (34 points), and SEARL (31 points).

Meanwhile, the sectors that mainly contributed negatively were cements (207 points), banks (135 points), technology (66 points), OMCs (26 points) and textile (21 points). Stock-wise negative contributions came from BAFL (104 points), DAWH (72 points), SYS (57 points), KOHC (51 points), and EFERT (43 points).

Shagufta Irshad, an analyst at JS Research, said the KSE-100 remained volatile throughout the week owing to selling pressure over political noise during the period.

Analyst Nabeel Haroon at Topline Securities said major events during the outgoing week were: the SBP’s announcement on Monday, reducing the policy rate by 100bps to 19.5 per cent; Fitch Ratings upgrading Pakistan’s long-term foreign-currency issuer default rating (IDR) to ‘CCC+’ from ‘CCC’; CPI inflation for July 2024 clocking in at 11.1 per cent YoY as compared to 12.6 per cent in June 2024; and Pakistan’s trade deficit for July 2024 coming in at $1.94 billion down by 19 per cent MoM.

For the fortnight, the government reduced petrol and diesel prices by Rs6.2 per litre and Rs10.9 per litre, led by lower ex-refinery prices.

Market awaits approval of the $7 billion IMF facility, which is expected this month. Progress on Chinese debt restructuring from current levels is also expected, where any breakthrough may support the country’s debt payment schedule from here onwards.

The SBP raised $141 billion through PIB auction, coupled with three-year and five-year PIB yields declining by 36bps and 15bps, respectively. SBP reserves increased by $75 million or 0.8 per cent WoW to $9.1 billion.

Furthermore, the Pakistani rupee remained stable against the dollar at 278.5.