Pakistan stocks likely to remain positive next week

KARACHI: The Pakistan equity market tumbled in the outgoing week, and the analysts reiterate positive outlook next week given the government’s accommodative monetary policy stance and potential resumption of the International Monetary Fund (IMF) programme.

“Meanwhile, the MSCI review next week and concerns over [the] fourth wave of [the] Covid-19 may keep investors’ sentiments skittish; however, the vaccination drive in the country is in full swing and the economic growth story still remains intact,” an analyst at BMA Capital said.

The domestic bourse closed in the red zone during the week ended September 3, 2021, primarily on account of augmenting concerns on the external account. As per the media reports, imports clocked-in at Rs6.3 billion for August 21, taking the trade deficit to Rs4 billion, which is the highest-ever for a single month.

The Pakistan Stock Exchange KSE-100 shares index shed 0.37 per cent, or 179.06 points, to close the week ended September 3, 2021 at 46,957.47 points. The KSE-30 shares index shed 0.33 per cent, or 62.63 points, to close at 18,851.16 points.

“The local currency has continued to slide downwards with the rupee/dollar settling at Rs166.9. Meanwhile, the cement sector has also seen pressure this week with [the] coal prices continuing to soar,” an analyst at Arif Habib Limited said.

Further, tension in the geopolitical region and uncertainty around Pakistan’s potential downgrade from the Emerging markets (EM) to the Frontier markets (FM) kept the investors wary over foreign outflows.

Foreign selling continued this week, settling at $5.9 million against a net selling of $5.4 million last week. Selling was witnessed in commercial banks ($4.3 million), cement ($1.3 million) and exploration and production ($0.8 million).

Average volumes surged 20 per cent to clock-in at 462 million shares/day, while the average value of traded securities increased 5 per cent to settle at $83 million/day.

Major data releases, which kept the investors engaged included weekly forex reserves of the State Bank of Pakistan, which surged 15 per cent to $20.1 billion; trade balance data, which showed a widened deficit of $7.3 billion during the two months of FY22 against $3.4 billion last year; and petroleum sales during the period under review, which improved 21 per cent to 3.9 million tonnes.

Another important event during the week included the book-building of Air Link’s Initial Public Offering (IPO), which concluded with an oversubscription of 1.6 times at a strike price of Rs71.5/share, indicating the presence of ample liquidity in the market and investors’ interest in exploring new sectors.

Analysts believe the market may show range-bound behaviour next week. Concerns persist over how manageable the deficit on the current account may be. However the IMF review may note some positive progress, especially on the back of impressive recent tax numbers for July-August (23 per cent higher than the target).

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