PSX Makes Progress in Nervous Trading

KARACHI:

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

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

According to reports, the announcement by the State Bank of Pakistan to bring the Monetary Policy Committee meeting by a week to Nov. 19 took its toll on the trading environment and kept profits to a minimum. Earlier in the week on Monday, stock trading started negative as uncertainty over the approval of the next loan tranche by the International Monetary Fund (IMF) and mounting concerns about inflation.

Meanwhile, the upward revision of the cash reserve requirement (CRR) for banks by the State Bank to 6% also affected the KSE-100 index. The market recovered in the next session, driven by a recovery in investor confidence following a number of positive developments, including the approval of the second tranche of payments to 20 independent power generators. This factor in particular helped to boost investor interest in the stock market.

In addition, the government’s decision to leave petroleum product prices unchanged sparked optimism among market participants. Bears gripped the market over the next two sessions, dragging it down more than 400 points as investor spirits were tarnished by the rescheduling of the monetary policy meeting, which was brought forward by a week. The announcement sparked panic among market participants, raising fears of a major rate hike.

Market players have sold their stocks in anticipation of a surprise rate hike in the monetary policy announcement due on Friday, causing the KSE-100 index to fall. In addition, investors focused sharply on the joint session of parliament, which was held on Wednesday to discuss some key issues, and mostly stayed on the sidelines.

The market rebounded in the last session of the week on the icing on the cake by investors buying stocks that had fallen to attractive valuations. Robust year-over-year growth in large-scale manufacturing (LSM) production in the first quarter (July-September) of the current fiscal year further supported the upward trend.

The rupee continued to depreciate, reaching as high as Rs 175 against the US dollar by the end of the week on the back of stalled progress in talks between Pakistan and the IMF over the resumption of the $6 billion loan program.

“After clarity in monetary policy, we believe the market will react accordingly next week,” Arif Habib Limited said in a report. “The recent bill to make the SBP autonomous must meet another condition from the IMF, so we believe that market sentiment depends on the announcement of a loan package.”

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

In terms of sectors, positive contributions came from banks (403 points), fertilizers (172 points), cement (158 points), exploration and production (140 points) and energy (43 points).

On the other hand, the negative contributors were technology (176 points) and fast moving consumer goods (41 points).

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

Meanwhile, negative contributions came from TRG Pakistan (233 points), Unity Foods (32 points) and Pakistan Stock Exchange (16 points). Foreign sales continued during the reporting week, which came in at $25 million compared to net sales of $5.3 million last week. Big sales were seen at commercial banks ($14.7 million) and fertilizer companies ($4.7 million).

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

Published in The Express Tribune, November 21^NS, 2021.

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