PSX’s positive momentum expected to continue amid favourable macroeconomic backdrop: report

The stock market is expected to maintain its positive momentum as concerns in global markets ease and macroeconomic indicators show some stability. The expected approval by the IMF Executive Board later this month is expected to further boost market confidence, according to a report by AKD Securities.

The KSE-100 index showed mixed movements throughout the week, but eventually registered a modest gain of 0.4% on a weekly basis, closing at 78,570 points.

The week started in turbulent conditions, largely due to concerns about rising interest rates in Japan, which could affect global markets. However, a late-week rally in the exploration and production (E&P) sector, led by a surprise payment from MARI, helped improve market sentiment. Investor confidence was also boosted by debt refinancing commitments in line with IMF preconditions, ahead of the expected Executive Board meeting.

The latest Treasury auction showed a 50-54 basis point decline in yields, indicating that investors expect rapid rate cuts at the upcoming Monetary Policy Committee meetings. This decline in Treasury yields has led to KIBOR rates hitting 18-month lows.

In addition, remittances for July 2024 were recorded at $3.0 billion, an increase of 45% from the previous year, improving the outlook for the current account balance.

The energy sector remained in focus, with rising electricity prices prompting the government to form an energy task force. Plans were announced to retire or phase out 15 independent power producers (IPPs).

The Economic Coordination Committee (ECC) has asked the relevant ministry to develop a fertilizer policy to address concerns over gas production, prices and supply, which could lead to unified gas prices across the sector.

Market participation increased by 38% on a weekly basis, with average daily trading volume reaching 493 million shares compared to 358 million shares in the previous week. The Pakistani rupee remained stable against the US dollar, closing the week at 278.55 per dollar.

The major developments of the week were a 7% decline in cement sales due to slowdown in economic activity, a $51 million increase in SBP’s foreign exchange reserves, upbeat expectations of foreign investment after the IMF deal and the government’s consideration of increasing GST on tractors to 14%. The wool, textile weaving and spinning sectors were among the best performers, while vanaspati and allied industries, real estate and fertilizers saw declines.

In terms of market flows, the largest net sales were recorded by mutual funds, while individuals were the major buyers. The top performers included YOUW, BNWM, MARI, SNGP and APL, while PIBTL, AKBL, BAHL, FFC and ATRL were among the laggards.

According to the brokerage report, the market is expected to maintain its positive trend as concerns in global markets ease and macroeconomic indicators remain supportive. The expected approval of the IMF Executive Board is expected to further strengthen the momentum, with sectors benefiting from monetary easing and structural reforms expected to remain in focus.

However, the report said the modest economic recovery could limit the upside of cyclical stocks. Among the leading stocks are OGDC, PPL, MARI, MCB, UBL, MEBL, FFC, LUCK, FCCL and INDU.