Daily Times

IMF’s announcement of a Letter of Intent (LOI) helped spark a comeback on the Pakistan Stock Exchange last week, and the index ended the previous week with a gain of 761 points.

As the week began, the market rose as investors applauded the favourable catalysts. The finance minister’s order to convene a conference to discuss dividends from state-owned firms set off the buying spree. In addition, the inter-bank market witnessed a strengthening of the Pakistani rupee against the US dollar, which contributed to the bourse’s positive final tally. Continued strengthening of the Pakistani rupee against the US dollar, drop in Pakistan’s international bond yields, and encouraging movement on the IMF front caused the market to rise this week. On Thursday, however, the market trend reversed, with the benchmark KSE-100 index falling more than 250 points as investors sold off their holdings in anticipation of future gains.

On Friday, the market performed a U-turn with a dramatic rally, adding nearly 600 points to its previous day’s total. The uptick in buying at the exchange improved investors’ mood. After receiving a Letter of Intent from the IMF, which brought the country closer to the restart of its delayed loan programme, the stock market continued its positive advance and even gained momentum. Apart from that, bullish trading was encouraged by the rupee’s sustained recovery versus the US dollar. Compared to the previous week, volume increased by 28pc, which is still rather strong. As a result, the KSE-100 index ended the day up 761 points, at 42,857. The daily volume of shares traded climbed by 28pc week over week, to an average of 343m. Refineries (+5.5pc), the power industry (+5.1pc), and oil and gas exploration businesses (+4.1pc) were the main gainers.

An initial $1b investment by the United Arab Emirates in Pakistan was announced to kick off the week. Even better, the government is now closer than ever to having its loan programme with the IMF restarted thanks to the arrival of a Letter of Intent. Because of these encouraging signs, the value of the rupee rose by 4.1pc against the dollar. However, $555m was wiped out of foreign reserves due to interest payments on loans. The news on the financial front is that the minister of finance has stated that banks will not be subject to a special tax based on lesser ADR in the past. The analyst further noted that PSO got Rs62b for the confirmation of Letters of Credit for the purchase of petroleum products, while urea and diamino acid phosphate (DAP) offtake were predicted to drop by 37pc and 65pc, respectively, year-on-year in July.

Moreover, the Pakistani rupee appreciated against the dollar once again, rising to a weekly closing rate of Rs215.49 (a 3.82pc gain) from its previous level at Rs213.90. As a result of Pakistan’s receipt of the IMF’s Letter of Intent (indicating the delivery of a $1.7b tranche for the combined seventh and eighth review), investor confidence increased further. The market ended the week at 42,858 points, up 761 points (1.8pc) from the previous Friday’s finish. According to industry, banks (244 points), E&P (205 points), power (84 points), automakers (55 points), and oil marketers (60 points) all made favourable contributions (53 points).

Cement (-23 points) and tobacco (-23 points) were two industries that contributed poorly (15 points). Conversely, the Oil and Gas Development Company (79 points), Pakistan Petroleum (69 points), Meezan Bank (67 points), Pakistan Oilfields (56 points), and Hub Power Company were the top five gainers in terms of individual stocks (52 points). 63 points were deducted for Pakistan Services, 17 for Nestle Pakistan, 16 for Engro Polymer and Chemicals, and 16 for Pakistan Tobacco (15 points). Foreigners net sold $0.9m worth of shares, up from net selling of $0.7m the previous week. Both the banking industry ($1.6m) and the construction materials industry ($1.3m) saw significant selling activity.