Weekly Review: IMF Talks, Policy Rate to Move the Stock Market

KARACHI: The stock market is likely to make progress next week regarding the IMF talks and monetary policy announcement.

Analysts from Arif Habib Limited said a key near-term event is the expected resumption of the IMF program, which should boost the market as it would also imply inflows from other bilateral and multilateral partners.

They also point to the upcoming monetary policy announcement set to take place on January 23, 2023, which may keep leveraged sectors in the spotlight.

READ MORE: Stocks lost 423 points on uncertain IMF talks

The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) currently trades at a PER of 3.7x (2023) compared to the Asia-Pacific regional average of 12.1x, while offering a dividend yield of 11. 0 percent versus 2.9 percent offered by the region.

The week started on a negative note due to the political chaos in the country as the Punjab assembly was dissolved over the weekend and the subsequent dissolution of the KPK assembly was on the line.

This uncertainty continued throughout the week as the resignation of members of a political party was accepted in the National Assembly and clarity awaited on the vote of confidence against the prime minister.

On the economic front, remittance figures released by the State Bank of Pakistan (SBP) showed a 19 percent year-on-year decline in December 2022, compared to the same period last year.

READ MORE: Pakistani stocks gain 40 points as IMF resumes talks

A positive development during the week, however, was a slight increase in State Bank of Pakistan reserves, which rose by $258 million WoW to $4.6 billion.

In addition, PKR was written off at PKR 1.52 | 0.66 percent WoW against USD, ending the week at 229.67. The index closed at 38,408 points, losing 1,915 points (-4.8 percent) to WoW.

Negative industry contributions came from i) commercial banks (356.5 points), ii) cement (287.7 points), iii) oil and gas exploration companies (224.9 points), iv) fertilizers (166.5 points) and v ) technology (163.9 points). ).

READ MORE: Pakistani stocks gain 449 points on statement from central bank governors

While the sector that contributed positively was Real Estate Investment Trust (0.6 point). Scrub-wise negative contributors were LUCK (133.3 points), ENGRO (103.9 points), PSO (92.3 points), MARI (80.0 points), and BAHL (77.9 points). Meanwhile, scrupulously positive contributions came from EFUG (3.2 points), FFC (1.4 points), DCR (0.6 points) and COLG (0.2 points).

READ MORE: Pakistani stocks fall 1,378 points on economic turmoil

Foreign purchases continued this week, totaling USD 4.9 million compared to a net purchase of USD 1.2 million last week. There were major purchases at Exploration and Production (USD 1.4 million) and Commercial Banks (USD 1.2 million). On a local level, sales were reported by banks/DFIs (USD 4.1 million), followed by individuals (USD 3.0 million). Average volumes were 143 million shares (down 22 percent WoW), while average value traded was $21.7 million (down 20 percent WoW).