KARACHI: The Pakistan Stock Exchange (PSX) began the new year with increased vigor, buoyed by substantial foreign purchasing, notably in the technology sector. As a consequence, it gained 1.68 percent or 750 points in a week, raising the benchmark KSE-100 index to 45,345.65 points.
“A month-on-month decrease in the trade deficit, strengthening of the Pakistani rupee versus the US dollar, and prospects of new funds allocation by foreigners in PSX strengthened investor mood,” Arif Habib Limited wrote in its weekly report.
During the week under review, market participants were more confident when the federal cabinet approved the State Bank of Pakistan autonomy bill, paving the path for the release of the next IMF loan tranche.
Meanwhile, the Senate Standing Committee on Finance’s hearings on the “mini-budget” bolstered optimism for the restart of the IMF program, which kept markets upbeat.
Furthermore, the Pakistani rupee reversed a lengthy losing run and made a surprising rebound. The bounce was beneficial to the stock market and drove it higher.
Other significant developments during the week included: inflation for the month of December 2021 was 12.3 percent year on year, total cement sales were 4.2 percent lower year on year, the trade deficit widened by 85 percent year on year during December, clocking in at $4.86 billion, and the import bill increased by 52 percent year on year to $7.6 billion.
Meanwhile, foreign purchasing totaled $24.2 million last week, compared to a net purchase of $8.1 million the previous week. Technology ($22.5 million) and banks ($0.7 million) also saw purchases.
Individuals ($15.1 million) sold the most on the domestic front, followed by mutual funds ($8.4 million).
During the previous week, average volumes were 318 million shares (up 46 percent week on week), while average value exchanged was $57 million (up by 32 percent week-on-week).
In the news, inflation for the month of December-2021 was 12.3 percent year on year, the most since February-2020. Furthermore, overall cement sales for December 2021 were estimated to be 4.2 percent down year on year.
PBS released trade deficit figures on Thursday, revealing that the deficit increased by 85 percent year on year to US$4.86 billion in December 2021, while the import bill increased by 52 percent year on year to US$7.60 billion.
Week’s top gainers and losers
Fertilizer (+212 points), power generation (+159 points), commercial banks (+146 points), oil and gas exploration (+111 points), and engineering (+41 points) all made good contributions.
Hubco (+163 points), Systems Limited (+94 points), Pakistan Oilfields (+85 points), Engro Fertiliser (+85 points), and Fauji Fertiliser Company (+59 points) were the top scrip gainers.
Next week’s forecast
According to AHL, “going forward, we expect the market to show positivity in the upcoming week due to successfully meeting vaccination targets, the meeting with IMF scheduled on January 12, and expectation of healthy corporate profitability during the outgoing quarter, particularly across cyclical sectors should keep sentiments positive.”
“However, growing COVID-19 (fifth wave of coronavirus) infections and current macroeconomic worries such as increased imports and greater inflationary readings due to rising commodity prices may keep the market range-bound,” it added.
“The KSE-100 is now trading at a PER of 5.1x (2022) vs the Asia-Pacific regional average of 14.0x, with a dividend yield of 8.7 percent versus the region’s 2.3 percent,” the brokerage firm added.