Pakistan Stock Exchange index up 3.09%WoW

The pre-budget rally continued throughout the week ended May 17, 2024 with Pakistan Stock Exchange benchmark index closing at its historic high, as the bears failed to seize control at every turn and investor’s confidence remained high, driving the market to sustained gains. The benchmark index closed at 75,342 points on Friday with a gain of 2,257 points, up 3.09%WoW.

The market's bullish momentum is mainly attributed to recent talks with the IMF proceeding smoothly, without any hiccups.

Further, SPI weekly inflation is consistently on downward trend for the past five weeks, indicating a tapering down of CPI figures for the ongoing month.

Prices of petroleum prices, MS and HSD were decreased by PKR15.39 and PKR7.88 per liter, respectively, in the last fortnightly review.

Yields in the mid-week T-Bill auction also declined slightly.

Of significant importance, current account for April 2024 posted another surplus of US$491 million, lowering 10MFY24 deficit of mere US$202 million. With just two months left, FY24 CAD is expected to close substantially below the IMF’s forecast of US$3 billion.

Confirmation of the withdrawal of tax exemption from the FATA/PATA region has instilled overall positivity in the steel sector.

Alongside, additional revenue measure recommendations from IMF team comes on surface including proposals to increase withholding advance tax across automobile, real estate, and agricultural sectors.

Average trading volumes were down by 22.7%WoW to 554.50 million shares, as compared to 717.34 million shares traded in the earlier week.

Other major news flows during the week included; 1) during H1FY24, driven by agri sector, real GDP grew by 1.7% as per the central bank, 2) foreign investment peaked by 84% to 30-month high and 3) Ministry of Finance refused to extend subsidy on urea fertilizer due to financial snags.

Top performing sector were: Automobile parts & Accessories, Engineering, Synthetic & Rayon, Real Estate Investment Trust and Woolen, while Cable & Electrical goods, Close-end Mutual Fund, Transport, Tobacco and Power Generation & Distribution were amongst the worst performers.

Major selling was recorded by Banks/DFI with a net sell of US$9.85 million. Foreigners absorbed most of the selling with a net buy of US$14.94 million.

Top performing scrips of the week were: THALL, INIL, PSX, PKGP, and ISL, while top laggards included: PAEL, PTC, AGP, KEL, and NPL.

Market is anticipated to remain focused on FY25 budget related news in the near term. Overall, some profit taking can be expected with the index at its record high. However, with foreign buyers consistently purchasing, the rally is expected to continue amidst the market's attractive valuations.

The upcoming MPC meeting, scheduled just after the budget, will also be in the limelight.

Despite real interest rates being significantly positive, new taxation measures could pose a risk to the inflation outlook and possible start of monetary easing.