The stock market collapses during a gloomy week

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CARACHI:

The Pakistan Stock Exchange had a lackluster week of trading as jittery investors scrambled to find positive signals amid continued deterioration in macro indicators.

The continued decline of the Rupee to record highs against the US Dollar and the depletion of foreign exchange reserves have haunted the trading environment over the past week, keeping market participants at bay.

As a result, the benchmark KSE-100 closed the week with a plunge of 1,354 points, or 3.02%, to 43,486 points.

“The decline can be largely attributed to the depletion of foreign exchange reserves and the lack of clarity on the government’s intention to implement the request of the International Monetary Fund (IMF) on which the revival of the Extended Financing Facility (EFF) depends. ),” a report from Topline Securities said.

Additionally, “Saudi Arabia’s lukewarm response to an official delegation from Pakistan, where the kingdom reportedly tied an additional $3 billion in support to the relaunch of the IMF program, further dampened investor sentiment,” it said. he added.

The outgoing week started on a bearish note as the benchmark KSE-100 index plunged around 1,448 points on the very first day of trading.

Investors were seen rushing to unload their positions at all levels due to the continued deterioration in macroeconomic signals.

However, the next session saw some recovery, albeit in range bound trading activity. Market participants were seen looking for value in stocks that had fallen to attractive valuations due to the “bloodbath” seen the day before.

As a result, the KSE-100 index managed to add around 111 points on Tuesday.

The recovery trend, however, reversed again on Wednesday as skeptical investors tried to find positive signals amid domestic political turmoil.

The fall in the rupee, which was hovering around all-time lows, continued to weigh on market participants’ interest, causing the benchmark to fall a further 641 points.

The past two trading days have seen some recovery on the back of attractive stock value hunting, in addition to news of the highest ever inflows in April 2022.

The record remittance inflows reignited investor interest as they continued to look for some positivity on the economic front.

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They even played down the further depreciation of the local currency which settled at an all-time low against the US dollar on Friday, and resumed stock picking.

The last two days of the outgoing week added 623 points, helping the index recoup some of the losses.

“We believe clarity should emerge next week on some economic policies, which should help stock market sentiment,” said a report from Arif Habib Limited.

“It appears that the government is considering removing the fuel and electricity subsidy to gain IMF approval, which will be a positive sign for the market,” the report said, adding “once the package is adopted , other sources of foreign exchange should also open such as support from friendly states as well as the Asian Development Bank (ADB).

During the week under review, average daily traded volumes increased 13% week-over-week to 274 million shares, while average daily traded value increased 21% on a week-over-week basis. week to week to reach $43 million.

In terms of sectors, the positive contribution came from sugar and related industries (9 points) and miscellaneous (1 point).

Conversely, the sectors that contributed negatively were banks (351 points), cement (211 points), fertilizers (179 points), technology and communication (68 points) and electricity production (63 points).

Meanwhile, positive contributors in terms of shares were Pakistan Oilfields Limited (38 points), Millat Tractors (20 points) and Lotte Chemical Pakistan Limited (11 points).

However, the negative contribution came from Systems Limited (121 points), Lucky Cement (105 points), Habib Bank Limited (78 points), Engro Fertilizers (64 points) and United Bank Limited (64 points).

Overseas sales were seen over the past week, which amounted to $1.88 million, compared to net purchases of $2.01 million in the previous five sessions. Significant sales were seen in commercial banks ($1.6 million) and cement factories ($1.4 million).

On the local front, purchases were reported by banks ($16.3 million), followed by other organizations ($1.5 million).

Among other major news, urea uptake jumped 45% to 448,000 tonnes in April 2022, Central Development Working Group (CDWP) cleared four projects worth 136.74 billion rupees, Systems Limited would acquire NdcTech, Pak Suzuki Motor raised vehicle prices again and National Savings profit rates were increased to 250 basis points.

Published in The Express Tribune, May 15and2022.

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