Pakistan stocks likely to remain volatile next week

KARACHI: The benchmark KSE-100 Index shed 3.35 per cent in the week ended September 24, 2021, and the stocks are likely to remain volatile in the near-term with market direction to be determined by the International Monetary Fund (IMF) review, dealers said on Saturday.

“However, the index may continue to remain under pressure in the near-term on account of depreciating rupee against the greenback, reversal in the monetary stimulus, and uncertainty on the macroeconomic level,” an analyst at BMA Capital said.

In the outgoing week, the equities at the local bourse slumped across-the-board on investors’ concerns about freefalling rupee, surging current account deficit, and the central bank’s decision to roll back monetary stimulus.

The Pakistan Stock Exchange KSE-100 shares index shed 3.35 per cent, or 1,562.56 points, to close at 45,073.52 points. The KSE-30 shares index shed 3.99 per cent, or 737.96 points, to close at 17,742.36 points.

Foreign buying was witnessed this week, settling at $6.7 million, compared with a net selling of $10.9 million last week.

The average volumes declined 4 per cent to clock-in at 384 million shares/day, while the average value of traded securities settled at $73 million/day, down 18 per cent on a weekly basis.

An analyst at Arif Habib Limited said amid rising demand and the up-cycle in the international commodities exacerbating the deficit on the external front, raising red flags over the future CPI readings and building pressure on the rupee, the central bank commenced tapering its monetary stimulus.

“A 25bps hike in the policy rate, shifting the focus from prioritising growth to now ensuring sustainability, was put into effect to stop the economy from overheating.”

“While the government also adopted other measures to curtail demand such as tightening regulatory and consumer financing policies for the auto consumers; hence, the investors remained on the edge.”

Among other major news, the European Union extended GSP Plus status with six new conventions, the Asian Development Bank (ADB) forecast Pakistan’s economy to grow at 4 per cent in FY22, Pakistan to issue new international Sukuk as soon as in October, and the government proposed up to 37 per cent hike in gas tariff.

Resumption of the IMF programme next month could provide a breather.

“Reversing certain incentives such as in the case of autos should be viewed as material positive, particularly from a macro lens, easing pressure on the external account,” an analyst at AKD Securities said.

“Moreover, the investors should adopt a top-down approach to investing where the possibility of further interest rate hikes could bring the banking sector in the limelight, while techs and textiles (on currency depreciation where stronger earnings are yet to be priced in) are other sectors of interest.”

“Techs should remain under pressure, owing to structural impediments faced by one of the companies, deteriorating sentiments on the overall sector; hence, weakness should be taken as an opportunity to accumulate.”