Stocks set to climb on hopes of policy rate cuts

KARACHI: The stock market reached an all-time high with record increases during the outgoing week. It is expected to keep its upward momentum amid higher cuts in the key policy rate and strong financial earnings.

“We expect the market to maintain its positive trajectory on the back of anticipation of further rate cuts and result season, due to which certain scrips are projected to stay in the limelight, fuelled by anticipation of strong financial performance,” stated brokerage Arif Habib Limited.

The market showcased an outstanding performance during the week, crossing the 90k barrier (intraday) on Friday. This was primarily due to expectations of further policy rate cuts in the upcoming MPC meeting scheduled for November 4 amid anticipation of a fall in interest rates, which bolstered investors’ confidence.

The market closed at 89,994 points, marking a significant increase of 4,744 points or 5.6 per cent week-on-week (standing as the world’s best-performing market in terms of USD). Average volumes arrived at 670 million shares (up by 51.5 per cent WoW), while the average value traded settled at $ 105 million (up by 29.6 per cent WoW).

Foreigner selling continued during this week, clocking in at $16.4 million compared to a net sell of $11.6 million last week. Major selling was witnessed in banks ($8.5 million) followed by OMCs ($2.6 million). On the local front, buying was reported by mutual funds ($12.1 million) followed by other organisations ($8.3 million).

Sector-wise positive contributions came from fertilizer (1,385 points), cement (929 points), commercial banks (848 points), oil and gas exploration companies (371 points) and technology and communication (238 points). Scrip-wise positive contributors were FFC (853 points), UBL (374 points), EFERT (235 points), OGDC (206 points), and LUCK (203 points).

The sectors that mainly contributed negatively included textile composite (51 points), transport (19 points), and sugar and allied industries (4 points). Scrip-wise negative contributions came from ILP (87 points), POL (41 points), INDU (24 points), PIBTL (19 points), and BAFL (18 points).

Analyst Abdul Basit at JS Research said the week began with the passing of the 26th Constitutional Amendment Bill in the National Assembly, securing a two-thirds majority, followed by the nomination of Justice Yahya Afridi as the next chief justice of Pakistan.

A decline in political uncertainty added to investor confidence.

Pakistan reported a current account surplus for the second consecutive month in September 2024, amounting to $119 million. Net FDI for 1QFY25 rose by $251 million (48 per cent YoY), totalling $771 million.

Pakistan has also formally requested $1 billion from the IMF as part of the climate financing fund. Additionally, discussions are underway with the Asian Infrastructure Investment Bank (AIIB) for credit enhancement for the planned Panda bond, with an initial issue of up to $250 million. The government is also set to modify agreements with 18 more IPPs to a ‘take and pay’ model.

Nabeel Haroon, analyst at Topline Securities, said the KSE-100 index gained by 5.6 per cent on WoW basis, this bull run can be attributed to institutional buying, good corporate announcements in the ongoing result season and expectation of a decline in the policy rate in the upcoming monetary policy meeting.

Moreover, power generation declined by 6.4 per cent YoY to arrive at 12,487 GWh (17,343 MW) during September, compared to 13,339 GWh (18,527MW) during SPLY. Additionally, SBP reserves reached the highest since April 2022 to $11 billion (up by $18 million WoW). Meanwhile, the rupee depreciated against the dollar by 0.03 or 0.01 per cent WoW, closing at 277.6.