Pakistan: PSX Average Daily Trading Volume Declines 17%WoW – OpEd

The Pakistan Stock Exchange (PSX) remained volatile throughout the week, with the benchmark index losing 782 points or 0.95%WoW to close at 81,292 points on Friday, September 27, 2024. 

Anticipation of the IMF’s board approval scheduled for September 25, briefly improved investors’ sentiment on Wednesday. However, the positive sentiments were overshadowed by continuation of foreign selling after rebalancing of FTSE Russell, political noise, and concerns regarding the potential termination of contracts with certain IPPs, inducing selling pressure in power sector heavyweights.

Consequently, power generation and distribution sector contributed the significant decline, eroding 800 points from the index during the week.

The FBR is expected to post a shortfall of PKR275 billion in 1QFY25, according to the news flows. In efforts to increase tax revenue, GoP plans to abolish non-filer status and take strict measures against tax frauds.

Average daily trading volumes declined by 17.1%WoW to 389.35 million shares, as compared to 469.45 million shares traded a week ago.

Foreign exchange reserves by State Bank of Pakistan (SBP) increased by US$24 million to US$9.53 billion as of September 20, 2024.

On the currency front, PKR largely remained stable against the greenback throughout the week, closing the week at 277.64 to US$.

Other major news inflow during the week included: 1) IMF distanced itself from Pakistan's decision to arrange a US$600 million commercial loan at 11% interest rate, 2) US Assistant Secretary of State Donald Lu praises 'deeper' ties with Shehbaz government, 3) GoP borrowing surged to record high, 4) Farmers to get 251 green tractors and 5) ADB may approve 3rd-party guarantee in case of Reko Diq.

Transport, Fertilizer, Inv. Banks/ INV. Cos/ Securities Cos., Leather & Tanneries and Pharmaceuticals were amongst the top performers, Power generation & Distribution, Leasing companies, Textile spinning, Engineering and Jute were amongst the worst performers.

Major net selling was recorded by Foreigners with a net sell of US$12.44 million, mostly absorbed by Mutual Funds with a net buy of US$16.21 million.

Top performing scrips of the week were: FFC, GLAXO, AKBL, FFBL, and THALL, while the laggards included: HUBC, PGLC, SML, MARI, and KEL.

Following the approval of the IMF’s executive board and the subsequent receipt of the first tranche of US$1.02 billion, the market sentiments are poised to improve.

Additionally, easing inflation with September 2024 CPI expected at 7.0%YoY, coupled with ongoing monetary easing, is expected to keep equities in focus.

AKD Securities recommends sectors benefiting from monetary easing and structural reforms, particularly high-dividend-yielding stocks, which are expected to rerate as yields align with fixed income returns.