Stocks Soar as Investors Anticipate Budget Boost, Surpassing 41,000-Point Milestone
The stock market experienced a remarkable surge, fueled by expectations of favorable developments in the upcoming fiscal year 2024 budget and prospects of an agreement with the International Monetary Fund (IMF). The KSE-100 index concluded the week on a positive note, breaking through the 41,000-point threshold.
Trading kicked off on Monday with a positive outlook, thanks to corporate announcements of bonus share issuances to circumvent potential taxes in the forthcoming budget. Sector-specific activity further bolstered market sentiment. On Tuesday, optimism grew following the statement from the IMF mission chief, affirming continued engagement with Pakistani authorities.
However, the market remained range-bound on Wednesday and Thursday, erasing some gains due to concerns sparked by an IMF statement about domestic politics. Additionally, news of new taxes in the FY24 budget deterred investors from building positions.
As the week drew to a close, investors regained optimism, driven by hopes for a new IMF loan program and the likely allocation of Rs900 billion for the Public Sector Development Program (PSDP). Nevertheless, the uncertain political and economic landscape weighed on investors’ minds, resulting in marginal gains by the end of the week.
Closing with a 388-point increase, equivalent to a 0.95% rise week-on-week (WoW), the benchmark KSE-100 index settled at 41,352. In his report, JS Global analyst Wasil Zaman highlighted the positive start to the week, followed by a partial correction.
Among sectors, cement (up 3.8% WoW) and engineering (up 3.2%) emerged as the top performers, while pharmaceuticals (down 1.3%) and power (down 0.7%) underperformed. Foreign investors turned net buyers, with a purchase of $3.6 million worth of shares, focusing primarily on the food sector, while selling was primarily observed in the tech sector.
Regarding recent news, negotiations for the IMF loan program continued with uncertainty prevailing on both sides. Notably, the prices of petrol and diesel experienced reductions of Rs8 and Rs5 per litre, respectively. Inflation in May 2023 reached a record high of 38% year-on-year, with urban inflation at 35% and rural inflation at 42%.
State Bank’s foreign currency reserves declined by $102 million to $4.1 billion due to external debt repayments. Cement sales in May 2023 increased by 34% month-on-month (MoM), indicating a resurgence in construction activities. Additionally, oil marketing companies (OMCs) witnessed an 11% MoM rise in sales, reaching 1.30 million tons compared to 1.17 million tons in the previous month, as reported by the JS analyst.
In its report, Arif Habib Limited emphasized that the stock market initially displayed optimism in anticipation of specific budgetary measures, including the taxation of corporations that had previously evaded payments, potentially prompting companies to resume payouts. Furthermore, an IMF statement confirmed ongoing engagement with Pakistan’s government, paving the way for a board meeting to resume the loan program.
