Stocks succumb to bearish pressure

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Stocks took a beating in the outgoing week as tensions post-budget announcement weighed on investor sentiment, providing bears an opportunity to dominate trading throughout the week. Lack of positive triggers also led to overall lacklustre activity during the week.

The bourse commenced trading on a negative note on Monday in the first post-budget session as investors remained cautious ahead of State Bank of Pakistan’s (SBP) monetary policy announcement and the International Monetary Fund (IMF)’s board meeting.

The downtrend continued on Tuesday when investors remained glued to sidelines in the absence of positive cues despite the status quo maintained in the monetary policy as per market expectations.

The losing streak extended on Wednesday following Moody’s report saying “Pakistan might fail to restart the IMF’s loan programme and it could default due to weak reserves”, which dented investors’ confidence.

The KSE-100 index fell in the following two sessions as well. It remained under pressure on Thursday, dropping over 100 points over IMF’s statement on the FY24 budget. On Friday, the market extended losses marginally due to subdued investor interest in the wake of continuous delay in revival of $6.7 billion IMF programme.

The benchmark KSE-100 index registered a decrease of 603 points, or 1.4% week-on-week (WoW), and settled at 41,301.

JS Global analyst Muhammad Waqas Ghani, in his report, noted that the KSE-100 index succumbed to the pressure from bears during the outgoing week as the delay in IMF’s review continued to prolong with the lender raising objections over certain proposals in the FY24 budget.

Sector-wise, textile (-4.4% WoW), steel (-4%) and exploration and production (-3.2%) were the major underperformers. Foreigners remained net sellers ($0.7 million) with major selling in the E&P sector at $0.3 million.

On the economic front, the State Bank’s Monetary Policy Committee decided to keep interest rate unchanged at 21% over subdued domestic demand evident from the declining large-scale manufacturing (LSM) sector.

LSM posted a negative growth of 21% year-on-year (YoY) in April 2023, staying in the red for the eighth consecutive month. This took 10MFY23 LSM decline to 9.4% YoY.

State Bank’s foreign currency reserves increased $107 million, reaching $4 billion.

Furthermore, the government decided to keep prices of petroleum products unchanged till June 30. As per latest data, Pakistan’s trade deficit narrowed 49% YoY to $2.1 billion in May 2023, driven by a 36% contraction in imports, the JS analyst added.

Arif Habib Limited, in its report, said that the stock market commenced trading on a negative note in the week under review, reacting to the federal budget announcement last Friday.

Uncertainty over the monetary policy announcement by the State Bank also dampened sentiment. The following day the market turned positive given the central bank kept the policy rate unchanged in line with market’s expectations.

However, the IMF raised objections to the budgetary numbers and sought compliance with its programme conditions such as bridging the financing gap, which brought back bears to the market.

Apart from that, Moody’s expressed reservations about Pakistan completing the IMF programme by the end of June 2023.

The rupee depreciated against the greenback by Rs0.27 (-0.10% WoW), closing at 287.19/$.

In terms of sectors, positive contribution to the bourse came from chemicals (183 points), auto assemblers (100 points) and miscellaneous (13 points).

Negative contribution came from fertilisers (208 points), oil and gas exploration companies (163 points), commercial banks (121 points), power (111 points) and technology (60 points).

In terms of stocks, positive contributors were Colgate-Palmolive (Pakistan) (236 points), Millat Tractors (114 points), Shell Pakistan (47 points), Pakistan Services (18 points) and Systems Limited (13 points).

Negative contributors were Oil and Gas Development Company (83 points), Hub Power (68 points), Engro Fertilisers (68 points), Engro Corporation (62 points) and Pakistan Petroleum (62 points).

Foreigners’ selling came in at $0.71 million compared to net buying of $3.63 million last week, AHL added.

Published in The Express Tribune, June 18th, 2023.

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