[News] Stocks rally on investor optimism

[Mr.Hacker]

KARACHI:
The outgoing week sparked positivity at Pakistan Stock Exchange (PSX) in a four-day trading week before Eid holidays, which fuelled a rally on the back of investor confidence due to some improvement on the macroeconomic and political fronts.

Resultantly, the benchmark KSE-100 index powered past the 41,000- point barrier.

Strengthening sentiment, stemming from a host of positive developments, helped sustain a buying spree and lifted the index on Monday. Investors expected an agreement with the International Monetary Fund (IMF) soon following finance minister’s assurance about $1 billion support from the United Arab Emirates (UAE).

Bullish momentum accelerated on Tuesday over optimism about strong corporate results and due to rupee’s recovery against the US dollar in the inter-bank market.

Investors maintained the bullish trend on Wednesday as well when Pakistan’s current account data for March showed a surplus, the highest in two years, according to the State Bank of Pakistan (SBP) and market analysts.

Furthermore, hopes of positivity on the political front, rupee’s stability and robust financial results aided bullish close of the market.

The last trading session before Eid on Thursday witnessed a rally with the KSE-100 index surging over 500 points and surpassing the 41,000 mark, driven by strong corporate result announcements and current account surplus of $654 million.

In addition, news reports about a deal with Russia for discounted oil supplies supported the market’s uptrend.

The KSE-100 index gained 802 points, or 2% week-on-week, and settled at 41,008 by the end of the week.

JS Global analyst Muhammad Waqas Ghani, in his report, noted that investor participation improved by 26% week-on-week.

The key performing sector in the outgoing week was fertiliser (+3.8%), mainly on the back of Engro Corporation which gained 14% week-on-week. The company announced a hefty cash dividend of Rs40 per share alongside 1QCY23 results.

“Political noise persisted as parliament once again refused to provide Rs21 billion to the ECP (Election Commission of Pakistan) for holding elections in Punjab,” Ghani said.

On the economic front, Pakistan’s current account balance for March 2023 recorded a surplus of $654 million, an eight-year high and the third highest in the past 20 years.

Key driver for the surplus was the 27% month-on-month increase in worker remittances, a seasonal uptick that was usually witnessed in Ramazan.

Lower/ restricted imports also continued to play their role in containing the current account. The same, however, impeded economic growth as the latest large-scale manufacturing (LSM) data showed a fall of 5.6% year-on-year during 8MFY23.

During the week, the government raised Rs599 billion through T-bills auction against the target of Rs1,000 billion, the JS analyst added.

Arif Habib Limited, in its report, said that the market commenced trading on a positive note as the government announced that the UAE had given its commitment for a loan of $1 billion.

“However, the IMF is still seeking necessary financial assurances from other multilateral and bilateral creditors before restarting its loan programme for Pakistan,” it said.

According to news reports, Pakistan has shared a revised plan for bridging the financing gap of $6 billion.

Additionally, Pakistani rupee appreciated against the US dollar by Rs0.94, or 0.33% week-on-week, closing the week at 283.5/$.

In terms of sectors, positive contribution to the stock market came from fertiliser (442 points), commercial banks (235 points), power generation and distribution (76 points), oil and gas exploration companies (55 points), and tobacco (31 points).

Negative contribution came from technology and communication (99 points), miscellaneous (33 points), and insurance (21 points).

In terms of individual stocks, positive contributors were Engro Corporation (306 points), Dawood Hercules (86 points), Bank AL Habib (79 points), Hub Power (63 points), and United Bank (51 points).

Negative contribution came from Systems Limited (105 points), Pakistan Services (31 points), Adamjee Insurance (16 points), Murree Brewery (14 points), and Lucky Cement (5 points).

Foreigners turned net sellers during the week under review as they sold stocks worth $0.3 million as compared to net buying of $1.4 million last week, the AHL report added.