Stocks struggling amid economic uncertainty

KARACHI: Pakistan’s capital market would likely drift back and forth without a clear direction on the road as all eyes are on the fiscal and economic fronts as much of the outlook remains far from certain, officials said. analysts.

“Following the disbursement of a tranche by the IMF, the government is expected to release additional foreign economic assistance from various international creditors, in addition to humanitarian aid to the world’s floods and other financial institutions,” said a weekly inventory review by Arif Habib. ltd.

“However, investors will remain cautious given the current overall socio-economic situation in the country. Although we expect the market to be limited in the coming week. »

Over the past week, the market was mostly jittery and mixed. The trading week got off to a negative start due to concerns over massive flooding and its overall impact on the economy.

However, the market quickly recovered after the approval and subsequent disbursement of a $1.17 billion IMF tranche to Pakistan. As a result, the rupee strengthened against the greenback, closing the week at Rs 218.98, up Rs 1.68 or 0.8% week-on-week.

The uptrend was short-lived as the announcement of inflation figures for August 2022 (a 47-year high) changed overall market sentiment.

Additionally, trade figures released during the week also added to economic concerns, with the deficit jumping 29% month-on-month in August.

The market closed at 42,309 points, losing 282 points, down 0.7% week over week.

Average volumes reached 211 million shares, down 15% week-on-week, while average value traded came in at $31 million, down 15% week-on-week.

Over the past week, foreign investors have made outflows worth $0.74 million, compared to a net sale of $1.87 million last week.

Significant sales were seen in commercial banks ($1.8 million) and the electricity sector ($0.8 million).

On the local front, purchases were reported by banks/DFIs ($3.0m) followed by individuals ($2.4m).

Negative sectoral contributions come from banks (118 points), E&P (90 points), automobile assembly (61 points), miscellaneous (40 points) and composite textiles (31 points). The stocks that lowered the index were HBL (73 points), TRG (47 points), PSEL (41 points), ENGRO (39 points) and POL (36 points).

Key supporting sectors were cement (110 points) and leather & tanneries (25 points), while stocks that boosted the market during the week included SYS (76 points), EFERT (48 points), KOHC (32 points), FABL (31 points) and SRVI (25 points).

KASB Pakistan Research said that after a blistering start to the week on receipt of the IMF tranche, which the market had already priced in, stocks took a step back as concerns over economic losses caused by flooding in the country have worsened.

“The agricultural sector is expected to suffer the most losses as crops have been destroyed by the floods. Cotton crop yields will be extremely low, so yarn prices are expected to skyrocket in the near future, which will negatively impact the textile sector,” the brokerage said.

KASB analysts have warned that this will also lead to lower exports and the country will have to import staple crops for local demand.

“So we can also see a build-up of pressure on the trade balance,” the brokerage added.

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