PSX Experiences Good Growth During Optimistic IMF Discussions and Economic Confidence
The Pakistan Stock Exchange (PSX) experienced a robust week, displaying a bullish trend, following optimistic negotiations with the International Monetary Fund (IMF). The discussions were centered around obtaining the second $1.1 billion installment under the $7 billion Extended Fund Facility. Despite some initial market fluctuation, investor confidence in the nation’s economic future served to enhance the market.
The government‘s intention to decrease the energy sector’s circular debt by signing a loan agreement with banks also provided investors with confidence. As per Arif Habib Ltd (AHL), the market closed the week on a strong note, fueled by better domestic liquidity and upbeat sentiment regarding the IMF negotiations.
Major economic news propelled market action:
February inflation decelerated to 1.5%, the lowest rate since September 2015.
The government borrowed Rs2.207 trillion at T-bill and Pakistan Investment Bond auctions, with long-term investments being the favourite.
The trade deficit of the country increased to $15.8 billion, though year-on-year growth in OMC sales increased by 4%.
Coming as a positive, the State Bank of Pakistan (SBP) witnessed foreign exchange reserves growing by $27 million to $11.2 billion, with the rupee slightly weakening by 0.05%.
The KSE-100 index closed at 114,399 points, an increase of 1,147 points, or 1.01%, compared to last week. The market experienced early volatility, but firm investor optimism about the IMF mission and possible rate cuts by the SBP kept the market upbeat.
The government initiatives to tackle circular debt in the energy sector enabled sectors such as oil and gas exploration, cement, and OMCs to improve. The government borrowed Rs1.25 trillion at an interest rate of 10.8% for this purpose, which led to a rally in the stock market.
Sector Performance:
Sectors such as exploration and production, cement, OMCs, power, and glass contributed positively.
Negative contributions were observed in technology and communication, textiles, automobiles, and commercial banks.
Top performers were:
Pakistan Petroleum Ltd
PSO
Oil and Gas Development Company
Hub Power
Fauji Cement Company
Activity of foreign investors indicated net selling worth $5.3 million with heavy selling in the E&P and commercial bank units. Locally, banks/DFIs and companies exhibited heavy buying activity.
Even though there was a 41% decline in the volume of trading and a 24.2% fall in value traded, the market is likely to continue its positive trend. With easing inflation and expectations of further monetary policy easing, investors are confident of sustained growth in the stock market.
Shortly, AKD Securities is predicting that the market will remain on its upbeat trajectory, supported by hopes of decreasing fixed-income yields and firm investor optimism over the ongoing IMF negotiations.
