Daily Times

After closing the third consecutive week on a positive note, the start of the rollover week, year-end closing and proposed mini-budget may keep the Pakistan Stock Exchange (PSX) under pressure in the coming days.

However, $3.7 million net foreign buying last week, slowing rupee’s depreciation and stability in interest rate in the near-term may help the market recover, besides positive news from the Afghanistan front.

During the last week, the benchmark KSE-100 Index gained 218 points (+0.5 percent) on a week-on-week basis to close at 44,118.39 points. Volumes remained low and decreased on a week-on-week basis to 215 million shares against 265 million shares in the preceding week, showing an 18.7pc weekly drop. Similarly, average value traded settled at $45 million, showing a decline of 5 percent on a week-on-week basis. Foreigners remained net buyers with an inflow of $3.7 million, while major sellers remained mutual funds ($3.6 million) and individuals ($2.6 million).

From a technical perspective, return of the foreign buying is positive news for the bourse. Again, mutual funds and individuals remained net sellers during the week. This buying and selling trend last week shows that the market may remain positive at least for the first half of the coming week. However, selling due to the rollover week may keep the bourse under pressure, especially in the second half of the week.

Trading on Monday kicked off on a positive note as investors capitalised on the central bank’s liquidity injection amid upbeat large-scale manufacturing (LSM) numbers released in the preceding week. However, the market failed to sustain the optimism during the next two sessions amid widening current account deficit in November, which clocked in at $1.91 billion, and continuous depreciation of the Pakistani rupee.

The market reversed its trend on Thursday and gained about 91 points on confirmation from the Finance Ministry that the sixth review of the Extended Fund Facility will be presented to the International Monetary Fund’s (IMF) executive board on January 12. However, the benchmark index closed the week on a negative note as the optimistic approach faded away due to investors’ concerns about higher inflation and dip in total liquid foreign exchange reserves held by the central bank mainly due to external debt repayment.

Sector-wise positive contributions came from power (+4.1 percent), pharmaceutical (+3.5 percent), food (+2.2 percent), automobile assemblers (+2.2 percent) and technology and communications (+1.8 percent). On the flip side, negative contributions came from chemical (-2.9 percent) and textile composites (-1.5 percent).

According to experts, the performance during the last week was dictated by the news flow relating to the possible resumption of the dormant International Monetary Fund programme, pre-conditions of the programme and the legislation that the country needs to pass in order to unlock the cash flows from the Washington-based lender.

One of the major news stories in the week under review was the current account deficit number for November where the gap stood at $1.9 billion as opposed to the expectation of $2.5 billion. Other stories included the approval of textile and auto policies, missing the petroleum levy target by 41 percent, $1.5 billion loan approval by the Asian Development Bank for power-sector reforms and the increase in the base power tariff by 95 paisa.

Reportedly, the government has finalised a mini-budget involving fiscal adjustments and expenditure cuts worth about Rs600 billion as part of an understanding with the IMF. The government is set to withdraw GST exemptions and slap standard rate of 17 percent on import of mobile phones, computers, silver/ gold, different articles of jewellery, re-meltable scrap, LPG and many other products.