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.

 

PSX witnesses 27%WoW increase in trading

Pakistan Stock Exchange mostly maintained a positive momentum throughout the week ended on August 23, 2024, primarily driven by declining T-Bills yield and favorable corporate results. The benchmark index closed the week at 78,801 points, up 756 points or 1.0%WoW. Market participation surged by 27%WoW, with the average daily traded volume rising to 468 million shares from 368 million shares a week ago.

In Wednesday’s T-Bills auction, cut-off yields witnessed a significant decline, which brought the 3-month yield down to 17.49%, indicating market expectations of a rate cut exceeding 100bps in the upcoming Monetary Policy Committee (MPC) meeting scheduled for September 12, 2024. These expectations of rate cut led to the rerating of high dividend yielding stocks, notably FFC and UBL.

Additionally, NBP stood third in terms of index points contribution, driven by expectations of lower-than-expected provisioning related to pension case in its upcoming financial results.

Pharmaceutical sector also performed well, buoyed by better than anticipated financial results by the players, supported by the deregulation of non-essential drugs.

On the macro front, the anticipated timeline for IMF Executive Board approval was pushed to September from the previous August due to unmet debt rollover requirements.

The Finance Minister remains optimistic about securing Board’s approval by next month. The current account remains in control, reporting deficit of mere US$162 million for July 24, big thanks to remittances.

PKR largely remained stable, closing the week at PKR278.50/US$.

Major news flows during the week included: 1) July FDI inflow in July was up 64%YoY to US$136.3 million, 2) LSM sector in FY24 grew 0.92%YoY, 3) RDA attracted US$161 million in first month of the current financial year, and 4) Banking sector deposits increased 19% to PKR30.6 trillion in July 2024.

Woollen, Jute, and Leather and Tanneries were amongst the top performing sectors, while Tobacco, Automobile assembler, and Textile weaving were amongst the worst performers.

Major net selling was recorded by Insurance companies with a net sell of US$6.3 million. Mutual, Banks and Companies absorbed most of the selling.

Top performing scrips of the week were: NBP, PGLC, SRVI, HINOON, and BNWM, while top laggards included: YOUW, CEPB, SML, ISL, KTML.

Looking ahead, market is expected to continue its positive momentum due to August 2024 lower inflation reading, upcoming MPC outcome and positive development on the IMF negotiations.

AKD Securities opines that sectors benefiting from monetary easing and structural reforms would remain in the limelight. Additionally, with declining fixed income yields, high dividend-yielding stocks are expected to remain in focus.