Pakistan stocks likely to remain under pressure next week

KARACHI: The Pakistan stocks are expected to come under pressure after the State Bank of Pakistan (SBP) increased the benchmark interest rates by 150bps against the general consensus of 100bps to 8.75 per cent, dealers said.

An analyst at AKD Securities said the news of the current account deficit deteriorating to $1.7 billion would also create further volatility in the market. “Finally, the selling pressure generally seen during the rollover week will only add further fuel to the fire. As a result of the aforesaid factors, next week’s performance will likely to disappoint where we may see [the] index again testing the recent lows it posted.”

However, any announcement of the revival of the International Monetary Fund (IMF) programme may lift the doom over the Pakistan Stock Exchange (PSX) and give market something to cheer.

Positive news-flow regarding the revival of the IMF programme kept the market sentiments buoyant during the week ended November 19, 2021.

The Pakistan Stock Exchange KSE-100 shares Index gained 1.6 per cent, or 740.26 points, to close at 46,489.41 points. The KSE-30 shares Index gained 1.7 per cent, or 311.88 points, to close at 18,037.74 points.

An analyst at Arif Habib Limited said the market commenced on a negative note this week as a result of uncertainty about the IMF disbursements and mounting inflationary pressure but gained momentum with the government agreeing to pay Rs190 billion to the power producers and unchanged petroleum prices.

“Albeit, pressure was again witnessed with early announcement of the SBP’s monetary policy meeting with expectation ripe of a 100bps hike.”

Average daily volumes declined 23 per cent to 245 million shares/day, while the average value of traded securities settled at $53 million/day, down 17 per cent.

Foreign selling continued this week, clocking-in at $25 million, compared with a net selling of $5.3 million last week. Major selling was witnessed in commercial banks ($14.7 million) and fertiliser ($4.7 million).

The sector-wise positive contributions came from the banks (403 points), fertiliser (172 points), cement (158 points), E&P (140 points), and power generation (43 points), whereas, the sectors, which contributed negatively were technology (176 points) and FMCG (41 points).

Following clarity in the monetary policy, analysts believe the market will react accordingly next week. The recent bill to make the State Bank autonomous should now effectively remove another pre-condition of the IMF and; therefore, the market sentiment is hinged upon the announcement of the IMF package.

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