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KSE-100 closes in green despite rising inflation, import bill

— Reuters/File
— Reuters/File
  • KSE-100 index gains 1.68% or 750 points to close the week at 45,345.65 points.
  • Much-needed clarity about supplementary finance bill tosses KSE-100 index above 45,000-point barrier.
  • Rupee rebound proves positive for the stock market and propels it higher.

KARACHI: The Pakistan Stock Exchange (PSX) started the new year with renewed optimism, led by heavy foreign buying, particularly in the technology sector. As a result, it gained 1.68% or 750 points, pushing up the benchmark KSE-100 index to 45,345.65 points over the past week.

Much-needed clarity about the supplementary finance bill and renewed expectations about the revival of the International Monetary Fund (IMF) loan programme tossed the benchmark KSE-100 index above the 45,000-point barrier after a hiatus of one month.

“A decline in trade deficit on a month-on-month basis, appreciation of Pakistani rupee against US dollar, and expectations of fresh funds allocation by foreigners in PSX improved investors’ sentiments,” Arif Habib Limited stated in its weekly report.

During the week under review, the market players turned somewhat optimistic after the federal cabinet gave the green light to the State Bank of Pakistan autonomy bill to pave the way for the release of the next IMF loan tranche.

Meanwhile, the sessions of the Senate Standing Committee on Finance on the “mini-budget” further strengthened hopes for the resumption of the IMF programme which kept the investors’ sentiment optimistic.

Moreover, the Pakistani rupee broke a prolonged losing streak and made a surprise recovery. The rebound proved positive for the stock market and propelled it higher.

Other major developments during the week were: inflation for the month of December 2021 clocked in at 12.3% year-on-year, total cement sales for last month were reported 4.2% lower year-on-year, the trade deficit widened by 85% year-on-year during December clocking in at $4.86 billion, and import bill expanded by 52% year-on-year to $7.6 billion.

Meanwhile, foreign buying was witnessed this week, clocking in at $24.2 million against a net buy of $8.1 million recorded last week. Buying was witnessed in technology ($22.5 million), and banks ($0.7 million).

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On the domestic front, major selling was reported by individuals ($15.1 million), followed by mutual funds ($8.4 million).

During the week under review, average volumes clocked in at 318 million shares (up by 46% week-on-week), while average value traded settled at $57 million (up by 32% week-on-week).

On the news front, inflation for the month of Dec-2021 clocked in at 12.3% YoY, which is the highest since Feb-2020. Moreover, total cement sales for Dec-2021 were reported 4.2% lower YoY.

PBS revealed trade deficit data on Thursday where the deficit widened by 85% YoY during Dec-2021 clocking in at US$4.86bn, whereas the import bill expanded by 52% YoY to US$7.60bn.

Major gainers and losers of week

Sector-wise positive contributions came from fertiliser (+212 points), power generation (+159 points), commercial banks (+146 points), oil and gas exploration (+111 points), and engineering (+41 points).

Scrip-wise major gainers were Hubco (+163 points), Systems Limited (+94 points), Pakistan Oilfields (+85 points), Engro Fertiliser (+85 points) and Fauji Fertiliser Company (+59 points).

Outlook for next week

A report from AHL predicted: “Going forward, we expect the market to show positivity in the upcoming week attributable to successfully achieving vaccination targets, the meeting with IMF scheduled on January 12, and expectation of healthy corporate profitability during the outgoing quarter particularly across cyclical sectors should keep sentiments positive.”

“However, rising cases of COVID-19 (fifth wave of coronavirus) and current macro-economic concerns like rising imports, and higher inflationary reading due to increasing prices of commodities could keep the market range-bound,” it said.

“The KSE-100 is currently trading at a PER of 5.1x (2022) compared to the Asia-Pacific regional average of 14.0x while offering a dividend yield of 8.7% versus 2.3% offered by the region,” the brokerage house stated.

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