PSX benchmark index up 0.5%WoW

Pakistan Stock Exchange remained range-bound during the week ended on September 06, 2024 as investors opted for wait and see policy and unfolding of the key events, including IMF executive board’s approval and the rebalancing of the FTSE. The market movement was largely influenced by corporate results. The benchmark index was up 410 points or 0.5%WoW to close at 78,898 points on Friday.

On the macro front, GoP kept on exploring every possible option to bridge the external financing gap, including approaching commercials banks.

The outflows related to FTSE rebalancing began as changes will become effective from September 23, 2024.

The inflation eased to a single digit after almost 3 years, to 9.6% for August 2024. Consequently, real positive interest rate was reported at nearly 10%, and a differential between policy rates and 3-month secondary yield at 1.74%, leading the market to expect a rate cut in upcoming Monetary Policy Committee meeting.

Furthermore, a 16% annual rise in exports during August 2024 led to a 21%YoY contraction in trade deficit to US$1.68 billion.

Declining international oil prices, with WTI falling below US$70/bbl mark raised hopes for a reduced oil import bill and lower POL prices, which could help further in controlling inflation.

With the FBR missing its tax collection target in August 2024, a mini-budget remains a possibility if the shortfall persists. The finance minister has hinted a further reduction in the revised Federal PSDP budget of PkR1.1 trillion due to fiscal constraints.

Market participation declined by 18%WoW, with the average daily traded volume dropping to 493 million shares from 600 million shares in the previous week.

On the currency front, PKR largely remained flat against the greenback throughout the week, closing the week at 278.6/US$.

Other major news flows during the week included: 1) Sales of POL products dropped by 14% in August, 2) GoP debt rose to PKR69.9 trillion, 3) Saudi deal on Reko Diq 'nears completion', and 4) Cotton arrivals slump 60% as of August 31, 2024.

The top performing sector were Jute, Cable & electrical goods, and RIETs, while Woollen, Textile spinning, and Textile weaving were amongst the worst performers.

Major net selling was recorded by foreigners with a net sell of US$6.7 million. Individuals absorbed most of the selling with a net buy of US$5.7 million.

Top performing scrips of the week were: KOHC, SHFA, PIBTL, MARI, and PAEL, while laggards included: YOUW, BNWM, NRL, APL, and NATF.

According to AKD securities, IMF executive board approval, along with continuation of monetary easing, would keep equities in limelight.

An improving external account position and a better country credit rating, would keep foreigners’ interest alive.

Although the upcoming FTSE rebalancing may raise some short-term concerns, these are expected to be mitigated by the minimal holdings in FTSE Emerging Markets-related funds and the increasing weight in the MSCI FM Index.

Brokerage house recommends sectors that would benefit from monetary easing and structural reforms.