Stocks likely to stay positive amid hopes for EFF approval by the IMF

KARACHI: Stocks closed sharply higher during the outgoing week amid strong economic indicators. The market is expected to stay positive in the upcoming week amid the likely approval of an extended fund facility by the International Monetary Fund.

“We expect the market to maintain its upward trajectory, capitalizing on the momentum gained by the end of this week and further boost to come from the approval of the EFF facility by the IMF,” said brokerage Arif Habib Ltd. “With the ongoing result season, certain scrips are anticipated to be in the limelight amid the expectation of robust results.”

The KSE-100 index experienced a bullish week, driven by anticipation of the $7 billion loan approval from the IMF executive board for which the meeting is scheduled on September 25. The 50bps US Fed rate cut boosted market participation across Asian markets, including the local bourse.

The market closed at 82,074 points, marking an increase of 2,741 points or 3.5 per cent week-on-week. Average volumes arrived at 469 million shares (down by 22.6 per cent WoW), while the average value traded settled at $66 million (up by 20.9 per cent WoW).

Foreigner selling continued during this week, clocking in at $23 million compared to a net sell of $7.5 million last week. Major selling was witnessed in the fertiliser ($9.8 million), E&P ($6.1 million) and banks ($2.8 million) sectors. On the local front, buying was reported by mutual funds ($15.5 million) followed by individuals ($4.4 million) and banks ($3.3 million).

Sector-wise positive contributions came from commercial banks (1,139 points), E&P (637 points), fertilizer (631 points), cement (161 points) and OGMCs (74 points). Scrip-wise positive contributors were MARI (567 points), FFC (324 points), MEBL (304 points), EFERT (287 points), and MCB (278 points).

The sectors that mainly contributed negatively were refinery (30 points), engineering (29 points), and glass & ceramics (24 points). Scrip-wise negative contributions came from NBP (33 points), PPL (29 points), DGKC (27 points), FFBL (23 points), and TGL (22 points).

Analyst Muhammad Waqas Ghani at JS Research said the KSE-100 index closed at an all-time high level of 82,074 on the last trading day of this week. “Despite foreign investors being net sellers, with a net outflow of $23 million (FIPI) during the week mainly owing to FTSE rebalancing, positive sentiment from domestic players, fuelled by encouraging news on the economic front including the upcoming IMF meeting, offset the impact,” he said.

Reports of economic stabilization and expectations of interest rate cuts following the government’s rejection of market treasury bill bids for all tenors are being viewed positively by the market.

As per the latest data released by the SBP, Pakistan’s current account balance clocked in at a surplus of $75 million in August 2024, owing to remittances outpacing the trade deficit. The surplus, however, did not create a notable difference to the cumulative current account deficit for 2MFY25, which amounted to $171 million.

Nabeel Haroon, an analyst at Topline Securities, said the gain in the market can be attributed to a decline in KIBOR and yields on government bills in the secondary market, indicating market expectations of a further cut in the policy rate, going forward.

According to the latest report by the Pakistan Bureau of Statistics (PBS), large scale manufacturing (LSM) recorded a 2.4 per cent YoY increase in July 2024, marking a return to positive growth after a YoY decline in Jun-2024. SBP reserves also increased by $43 million during the week, bringing the total to $9.51 billion.