Stocks recover during year’s last trading week

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KSE-100 index settles at 40,420

Pakistan Stock Exchange (PSX) recovered some ground in the last trading week of calendar year 2022 after remaining range bound owing to a cautious approach by investors, who kept in view multiple developments in the country and beyond, particularly the delay in IMF’s ninth review.

The week kicked off on a positive note, following previous week’s battering, as the easing of political noise boosted investor confidence. Investors remained optimistic about the revision in circular debt management roadmap and constitution of a committee to address the challenge, which helped the benchmark KSE-100 index surpass the 40,000-point mark.

However, the index failed to continue the positive momentum on Tuesday as uncertainty prevailed after the announcement of Pakistan Tehreek-e-Insaf (PTI) about the upcoming dissolution of Punjab and K-P assemblies.

The bourse continued its range-bound activity with investors choosing to stay sidelined in order to observe developments in relation to the International Monetary Fund (IMF) loan programme.

A “bloodbath” was witnessed on Wednesday over reports of delay in the resumption of IMF programme and fears of default, which shattered investor confidence. Bears took over the bourse, though Finance Minister Ishaq Dar reiterated “Pakistan will not default”.

Market sentiment flipped on Thursday as bulls returned, taking fresh positions and buying stocks at attractive valuations following assurances that Pakistan would complete the IMF programme.

Market participants continued to show optimism and expected positive developments about the IMF programme. They engaged in active buying on the last trading session of the year.

The benchmark KSE-100 index closed the week up by 751.25 points, or 1.9%, at 40,420 compared to the previous week.

After a tough couple of weeks, the KSE-100 stabilised during the outgoing week, closing at 40,420, up 1.9% week-on-week.

The week started with slight easing of political situation in Punjab as Chief Minister Pervaiz Elahi agreed not to dissolve the assembly on the directives of Lahore High Court.

Sector-wise, food (+10.3%), E&P (+7.2%) and cement (+4.9%) were the outperformers while chemical (-2.4%) and fertiliser (-0.2%) weighed the market down.

Foreigners were net sellers during the week with stock selling worth $16.6 million, primarily driven by offloading in banks ($15.8 million), the JS analyst said.

On the news front, the IMF programme continued to remain stalled while the fund set a timeline of two to three weeks for Pakistan’s government to meet its conditions such as fixing the cash-bleeding energy sector, additional taxation measures and structural reforms.

“SBP, on the other hand, took measures such as the relaxation in restrictions on opening LCs for certain sectors while rates of financing were raised by 2% to 13%,” he said. State Bank’s forex reserves further declined to critically low levels at $5.8 billion, down $294 million week-on-week due to external debt repayments.

Lastly, textile millers, in a letter written to the government, expressed concern, saying that the sector was operating at nearly 50% of its capacity in the aftermath of floods, the JS analyst added.

Topline Securities, in its report on PSX’s monthly performance, said that the KSE-100 index declined by 4.6% month-on-month in December, which it attributed to a number of factors.

These included an increase in the State Bank’s policy rate by 100 basis points to 16%, the delay in IMF’s loan programme as Pakistan continued to negotiate with the global lender and the dwindling foreign currency reserves.