MPC meeting to stay key development for stocks

KARACHI: Stocks closed slightly higher during the outgoing week while analysts expect the market to keep up the positive momentum amid an expectation of a cut in the key policy rate and development on the IMF front.

“Market participants are expected to closely monitor the Monetary Policy Committee (MPC) meeting in the coming week (September 12), where we expect the policy rate cut of 1.5 per cent,” stated brokerage Arif Habib Limited. “Any developments related to the IMF programme will further influence market sentiment. With the ongoing result season, particular stocks are anticipated to garner interest owing to their expected robust financial performance.”

The market commenced on a negative note given investors resorted to profit-taking. The momentum shifted towards the green zone post the announcement of single-digit inflation of 9.6 per cent (34-month low), renewing expectations of a cut in the policy rate in the upcoming MPC meeting next week.

On the IMF front, the government is hopeful that all the conditions and requirements of the lender will be met in time and Pakistan’s case will be approved by its board.

The market closed at 78,898 points, gaining 410 points or 0.5 per cent week-on-week. Average volumes arrived at 676 million shares (up by 11.8 per cent WoW), while the average value traded settled at $52 million (up by 22.5 per cent WoW).

Foreigner selling was observed during this week, clocking in at $6.7 million compared to a net buy of $3.7 million last week. Major selling was witnessed in fertilizer ($2.6 million) and exploration and production ($2.2 million). On the local front, buying was reported by individuals ($5.7 million) followed by other organisations ($3.3 million).

Sector-wise positive contributions came from E&Ps (248 points), cement (191 points), fertilizer (68 points), power generation (61 points) and auto assembler (56 points). Scrip-wise positive contributors were MARI (172 points), UBL (117 points), KOHC (85 points), OGDC (82 points), and EFERT (63 points).

The sectors that mainly contributed negatively were commercial banks (-89 points), chemical (-40 points), and technology (-39 points). Scrip-wise negative contributions came from MEBL (170 points), POL (54 points), NBP (51 points), HBL (49 points), and COLG (35 points).

Analyst Wadee Zaman at JS Research said the KSE-100 index remained largely range-bound this week, posting a gain of 0.5 per cent. “Investors await the IMF board's approval EFF,” Zaman said.

Nabeel Haroon, an analyst at Topline Securities, said the gain in the benchmark index can be attributed to CPI inflation number for the month of August 2024 that clocked in at 9.6 per cent YoY as compared to 11.1 per cent in July 2024.

Other major development during the week were Pakistan’s trade deficit for the month of August 2024 clocking in at $1.68 billion (down by 12 per cent MoM) and T-bill auction where participation of Rs1.62 trillion was observed with the government raising Rs835 billion against a target of Rs700 billion and maturity of Rs385 billion; yields remained largely same.

Petroleum sales witnessed a decline of 14 per cent YoY in August. A notable development this week was the significant drop in international oil prices, which have fallen 20 per cent since their peak in early 2024.

Urea and DAP sales plummeted by 14 per cent and 70 per cent YoY, respectively in August. Total cement sales declined by 26 per cent YoY in August. The SBP’s reserves climbed up by $33 million WoW, reaching $ 9.4 billion. The upcoming FTSE index rebalancing may trigger foreign outflows in the near term.