Pakistan stocks poised for strong year-end performance

KARACHI: The Pakistan equity market is poised for a strong year-end performance, owing to the ease-off in the global commodities, improving Pakistan’s macro outlook, International Monetary Fund (IMF)-related uncertainty largely behind and completion of the MSCI-related re-balancing, dealers said.

The stocks posted marginal gains during the week ended December 10, 2021, amid depreciating rupee, rising deficits and anticipation of a sharp jump in the interest rates, they said.

“[The] global commodity prices are in a downward spiral as [the] Covid’s new variant threatens global economic growth outlook with TRJ Commodity Index down 4.5 per cent in the last 15 days, providing [the] much-needed confidence in Pakistan’s macro outlook,” Hamza Kamal at AKD Securities said.

Moreover, with the IMF-related uncertainty largely behind and the MSCI-related re-balancing complete, these developments could act as a catalyst for the index, gaining upward momentum with the year-end phenomena carrying the index forward.

“November inflation at 11.53 per cent with [the] signs of higher inflationary readings in the coming months would keep [the] investors on toes with regard to the pace of [the] monetary adjustments in our view.”

“We continue to advocate for thematic investments where we like [the] banks on monetary tightening, cements on declining coal prices, improving earnings outlook, and energy on the circular debt payments.”

The Pakistan Stock Exchange KSE-100 shares Index gained 0.37 per cent, or 162.95 points, to close at 43,232.83 points. The KSE-30 shares index gained 1.09 per cent, or 182.53 points, to close at 16,900.77 points.

The recovery in participation came in with average daily trading volumes increasing 20.8 per cent to 319 million shares. The average value of traded securities for the outgoing week declined 73.6 per cent to $15.85 million.

Ahsan Mehanti at Arif Habib Corporation said that the stocks closed under pressure during the week on the rupee instability and surging government bond yields.

“Foreign outflows, hike in the industrial power tariff, uncertainty over [the] resumption of [the] IMF programme played a catalytic role in [the] bearish run at the market.”

An analyst at KASB Securities said the trade imbalances were hovering at record levels for the last few months because of rising economic activity, amid the commodity up-cycle.

“[The] latest trade figures highlight that Pakistan’s imports surged to [an] all-time high level of $7.75 billion in November.”

“Based on [the] SBP’s forward guidance and the macro-imbalances depicted in [the] recent economic data points, we believe the SBP could potentially hike the policy rate by another 125bps and bring [the] interest rates back to double-digits.”

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