Weekly review: stocks will react positively to the agreement with the IMF

KARACHI: Pakistani stocks are likely to react positively over the next week due to the expected agreement with the International Monetary Fund (IMF), as the country has met almost all requirements.

Analysts at Arif Habib Limited said clarity should emerge next week on some economic policies that should help stock market sentiment.

“It appears that Pakistan has met all the conditions to enter the IMF program to receive the $1 billion tranche,” they added.

READ MORE: Pakistani stocks tumble over imposition of super tax

Once the package is adopted, other sources of foreign exchange reserves should also open up, which should relieve some pressure on declining foreign exchange reserves.

A Chinese loan of $2.3 billion has already been rolled over and therefore the market is expected to be positive in the coming week.

The benchmark KSE-100 of the Pakistan Stock Exchange (PSX) is currently trading at a PER of 4.1x (2022) against the Asia-Pacific regional average of 11.8x while offering a dividend yield of around 9.6% against around 2.7% offered by the region.

Analysts said the market started on a negative note this week due to uncertainty surrounding the IMF program, with the index losing 300 DoD points. However, sentiment turned positive when a Chinese consortium of banks signed a $2.3 billion loan facility agreement and the Economic Coordinating Committee (ECC) approved the second installment of Rs 96 billion to the Independent Power Producers (IPPs) of the 2002 Energy Policy.

READ MORE: Pakistani stocks rally on Chinese loan facility

Additionally, the finance minister announced that an IMF deal was imminent, which also helped boost investor sentiment.

However, in the last trading session, the government announced a 10% super tax on 13 major sectors along with an additional 4% levy on banks, causing the market to spiral and hit an intraday low. of 40,555 points.

Separately, SBP reserves fell by $748 million to $8.24 billion, putting further pressure on the Pakistani Rupee (PKR), which fell to an all-time low of 211.93 for a dollar, but the announcement of the agreement with China helped the PKR to recover. some lost ground and close at 207.48 for the week.

The market closed at 41,052 points, down 1,089 points (down 2.58%) Week on Week (WoW).

Negative sector contributions came from i) Banks (296 points), ii) E&P (194 points), iii) Cement (194 points), iv) Fertilizers (120 points) and v) Textile Composites (61 points) .

READ MORE: Pakistani stocks lost 68 points on rupee depreciation

While the sectors that contributed positively are i) Tobacco (12 points), ii) Insurance (12 points), and iii) Paper & Cardboard (8 points).

The negative contributors at certificate level were UBL (97 points), POL (88 points), ENGRO (83 points), LUCK (79 points) and HUBC (75 points). Meanwhile, the positive contribution in terms of certificates came from EFUG (20 points), KEL (18 points), KAPCO (13 points), PAKT (12 points) and PKGS (8 points).

READ MORE: Pakistani stocks gain 749 points on IMF program hopes

Overseas sales were seen this week reaching $2.39 million compared to a net sale of $1.91 million last week. Significant sales were seen in All Other Sectors ($3.5 million) and Banking ($1.9 million). On the local front, purchases were reported by individuals ($7.0 million) followed by other organizations ($3.4 million). Average volumes reached 301 million shares (up 73% WoW) while the average traded value was $44 million (up 72% WoW).

READ MORE: Rupee slides to new low at Rs211.93 against USD

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