Market Review: A month of optimism

September 1, 2022 (MLN): The Pakistan Stock Exchange Market (PSX) rebounded nicely in August 2022 with the progress on the revival of the International Monetary Fund (IMF) program resonating with investors as the benchmark KSE-100 index gained around 2,200 points during the said month and settled at 42,351.15-mark, up by 5.5% compared to the previous month’s closing.

The domestic market was off to a good start in August on the back of optimism surrounding the letter of intent received from IMF after meeting all the pre-requisite for the $1.16bn tranche.  

Further, there were also constructive news headlines related to investment in Pakistan from Saudi Arabia and UAE in different sectors and the recovery of PKR against the dollar that added to the bounce. The rupee gained 9.4% against the greenback to close at PKR 218.75 per USD in the outgoing month.

This PKR appreciation translated PSX’s dollar-based gains to 15.43% MoM, rendering PSX amongst the best-performing markets in August 2022.

Meanwhile, no change to the SBP’s stance on the monetary policy statement, 45% MoM decline in current account deficit, relaxation to power consumers on FCA, removal of restrictions on the import of luxury items and surge in LSM output by 11.5% YoY in June also bolstered the investors’ appetite.

However, the index pared some of the gains towards the latter half due to the devastating floods in the country.

“The disbursement by IMF and expectations of foreign aid to counter the calamity have largely calmed investors, who now look at a potential rebound in the economy next year with agriculture growth posting a recovery, inflation tapering off and lower interest rates aiding economic activity,” a research report by Arif Habib said.

Yesterday, the central bank received proceeds of $1.16bn (the equivalent to SDR 894 million) under the Extended Fund Facility (EFF) after the IMF Executive Board completed the combined seventh and eighth reviews.

It will help improve SBP’s foreign exchange reserves and facilitate the realization of other planned inflows from multilateral and bilateral sources.

Sector-wise analysis reveals that the Cement sector has been credited for leading the index into the green district as it contributed 581 points to the KSE-100 index, followed by Commercial Banks, Fertilizer, Technology & Communication and Oil & Gas Exploration Companies which added 546, 256, 196 and 130 points to the index. In particular, the scrips of LUCK (301 points), SYS (212), MEBL (173), UBL (129) and ENGRO (118 points) turned out to be the most attractive ones.

During the month, 80 companies traded in green while 20 landed in the red zone. The All-Share Market Cap increased by nearly $3.87bn, i.e., 14% higher than the previous month. In terms of PKR, the All-Share Market Cap surged by Rs263bn i.e., 3.88% higher as compared to the last month.

Figures released by NCCPL showed that foreign investors sold a net $5.4mn worth of stocks during the month with foreign corporates doing the bulk of selling at $10.9mn. This was somewhat offset by overseas Pakistanis, purchasing stocks worth $5.3mn.

On the local front, brokers purchased $10.4mn worth of equities, followed by individual investors with $7.9mn and local companies with $5.5mn. Other significant transactions included $16.4mn worth of stocks sold by insurance companies.

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