PSX expected to stay positive on IMF programme resumption

KARACHI: The Pakistan Stock Exchange (PSX) is expected to remain in the green territory next week on the potential resumption of the International Monetary Fund (IMF) programme, improving the macroeconomic landscape and attractive market valuations.

The KSE-100 Index surged 0.5 per cent in the outgoing week, which ended September 10, 2021; while analysts reiterate long-term positive outlook on the local equities.

“[The] near-term volatility in the index cannot be ruled out depending on the geopolitical undercurrent, direction of PKR/USD parity, and the Covid situation in the country,” an analyst at BMA Capital noted.

“Any short-term corrections should be taken as an opportunity to accumulate positions in banks, fertilisers, steel, autos, and technology sectors.”

During the outgoing week, the market commenced on a negative note owing to continuing pressure from the last closing, amid concerns over the trade deficit of $4.1 billion in August 2021.

Further, the depreciation of the rupee against the dollar to Rs168.02 further dampened the sentiment. Moreover, the decision of the MSCI to reclassify Pakistan to the Frontier Markets Index from the Emerging Markets in November 2021 led to foreign selling.

Albeit, towards the end of the week, the market turned positive, since the scrips were oversold and trading at attractive valuations.

The Pakistan Stock Exchange KSE-100 shares index gained 0.51 per cent, or 240.82 points, to close at 47,198.29 points. The KSE-30 shares index shed 0.35 per cent, or 66.55 points, to close at 18,784.61 points.

Average trading volumes declined 7 per cent to clock-in at 429 million shares/day, while the average value of traded securities surged 5 per cent to $87 million/day.

Foreign selling continued throughout the outgoing week, settling at $18.6 million against a net selling of $5.9 million in the previous week. Selling was witnessed in commercial banks ($10.9 million), cement ($6.1 million) and exploration and production ($0.9 million).

On the domestic front, the major buying was reported by individuals ($12.9 million) and insurance companies ($6.2 million).

An analyst at AKD Securities said the cement sector was among the major laggards for the week, losing 2.6 per cent, as coal prices continue to trade near the 10-year high, amid increased demand for power generation in the developed economies.

“Moreover, the government providing additional power to officials to monitor and control the prices of fifty [50] categories of products, including cement, steel also caused jitters among the investors, resulting in the engineering sector losing 2.6 per cent during the week.”

“[The] refinery sector remained among the laggards, as the delay in [the] approval of [the] refinery policy continues to be a drag; however, it has been included in the agenda for the next week’s CCoE’s [Cabinet Committee on Energy] meeting where an approval can be a significant trigger for the sector.”

The market is likely to continue the momentum gained in the last few trading sessions where the technology sector is expected to remain in the limelight, while additional interest can be witnessed in stocks newly added to the MSCI list.

After being downgraded to the Frontier markets, the next big checkpoint remains the IMF board’s approval of the next review where a successful review can instill optimism in the market.