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PSX advances in jittery trading

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KARACHI:

The Pakistan Stock Exchange (PSX) endured a tumultuous trading week as a combination of encouraging and discouraging news led to market fluctuation between red and green zones.

Bulls emerged victorious at the end of the week on November 19 as the benchmark KSE-100 index climbed 740 points, or 1.6%, and closed at 46,489 points.

According to reports, the State Bank of Pakistan’s announcement about bringing forward the monetary policy committee meeting by a week to November 19 took a toll on the trading environment and capped gains. Earlier in the week on Monday, the stock trading kicked off on a negative note owing to uncertainty about the International Monetary Fund’s (IMF) approval of the next loan tranche and mounting inflationary concerns.

Meanwhile, the upward revision in the cash reserve requirement (CRR) for banks by the State Bank to 6% also struck the KSE-100 index. The market rebounded in the next session, driven by the revival of investor confidence as a result of a number of positive developments, which included the approval of second installment of payments to 20 independent power producers. That factor, in particular, helped enhance investor interest in the bourse.

Moreover, the government’s decision to keep prices of petroleum products unchanged sparked optimism among market participants. Bears gripped the market for the next two sessions and dragged it down by over 400 points as investor spirit was dented by the rescheduling of monetary policy meeting, which was brought forward by a week. The announcement created panic among market participants, triggering fears of a big interest rate hike.

Market players offloaded their stockholdings in anticipation of a surprise rate hike in the monetary policy announcement due on Friday, which pulled the KSE-100 index down. Besides, the investors keenly focused on the joint session of parliament, held on Wednesday to discuss some key issues, and stayed mainly on the sidelines.

The market rallied in the final session of the week owing to cherry-picking by investors, who purchased stocks that had dropped to attractive valuations. A robust year-on-year growth in large-scale manufacturing (LSM) output in the first quarter (July-September) of current fiscal year lent further support to the uptrend.

The rupee continued to depreciate and reached the level of Rs175 against the US dollar by the end of the week owing to stalled progress in talks between Pakistan and the IMF on the resumption of $6 billion loan programme.

“Following clarity in the monetary policy, we believe the market will react accordingly next week,” stated Arif Habib Limited in a report. “The recent bill to make the SBP autonomous should meet another pre-condition of the IMF, therefore, we believe that market sentiment is hinged on the announcement of loan package.”

Average daily traded volumes fell 23% week-on-week to 245 million shares while average daily traded value dipped 17% week-on-week to $53 million.

In terms of sectors, positive contribution came from banks (403 points), fertiliser (172 points), cement (158 points), exploration and production (140 points) and power (43 points).

On the other hand, the sectors which made negative contribution were technology (176 points) and fast moving consumer goods (41 points).

Stock-wise positive contributors were Meezan Bank (96 points), Lucky Cement (76 points), UBL (73 points), Pakistan Petroleum (72 points) and MCB (71 points).

Meanwhile, negative contribution came from TRG Pakistan (233 points), Unity Foods (32 points) and Pakistan Stock Exchange (16 points). Foreign selling continued during the week under review, which came in at $25 million compared to net selling of $5.3 million last week. Major selling was witnessed in commercial banks ($14.7 million) and fertiliser firms ($4.7 million).

On the local front, buying was reported by insurance companies ($13.5 million), followed by individual companies ($7.7 million).

Published in The Express Tribune, November 21st, 2021.

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