Infostani International- The stock market faced a bearish trend as political uncertainty and profit-taking led to fluctuations. The benchmark KSE 100-share index closed lower, influenced by concerns related to the upcoming general elections and geopolitical tensions. Investors reduced equity positions in various sectors, impacting specific companies. The overall trading volume and value experienced significant declines, with notable fluctuations in share prices. Despite the bearish trend, foreign investors were net buyers during the session.
Stock Market Faces Bearish Trend Amidst Political Uncertainty and Profit-Taking
The stock market opened the week on a bullish note, but the increasing political uncertainty and potential consequences led some concerned investors to engage in selling, causing the benchmark KSE 100-share index to close in the red. Equities experienced fluctuations in both directions, with the index reaching an intraday high of 65,069 points, gaining 555 points initially. However, profit-taking at this level led to a reversal, and the benchmark index recorded an intraday low of 64,184, losing 331 points.
Due to the rising political noise surrounding the upcoming general elections on Feb 8, investors chose to reduce their equity positions by taking profits in selected stocks from the banking, exploration and production, technology, and OMC sectors. Consequently, United Bank Ltd, Pakistan Petroleum, Oil and Gas Development Company Ltd, TRG Pakistan Ltd, and PSO collectively lost 200 points.
On the positive side, Engro Corporation, Engro Fertilisers Ltd, and Dawood Hercules Corporation Ltd added 269 points due to renewed buying interest in these stocks. Ahsan Mehanti of Arif Habib Corporation mentioned that pre-poll uncertainty ahead of the IMF board meeting, scheduled for Jan 11, and doubts about a cut in the SBP policy rate amidst surging inflation contributed to investor nervousness. Additionally, concerns about geopolitical tensions played a role in the bearish close of the market.
Stock Market Report – KSE-100 Index Declines by 0.43%, Trading Volume and Value Experience Sharp Declines
The KSE-100 index closed at 64,237.03 points, losing 277.87 points or 0.43% from the preceding session. The overall trading volume decreased by 49.02% to 484.01 million shares, and the traded value also declined by 93.41% to Rs12.74bn on a day-on-day basis. Significant contributors to the traded volume included K-Electric Ltd (168.81m shares), Worldcall Telecom Ltd (21.98m shares), Pakistan International Airlines Corporation (17.94m shares), Pakistan Telecommunication Company Ltd (17.77m shares), and Cnergiyco PK Ltd (15.69m shares).
Companies that saw substantial increases in their share prices in absolute terms were Pak Suzuki Motor Company Ltd (Rs50.46), Reliance Cotton Spinning Mills Ltd (Rs35.00), JDW Sugar Mills Ltd (Rs33.69), Pakistan Services Ltd (Rs29.90), and Sapphire Textile Mills Ltd (Rs20.00).
On the other hand, companies witnessing the most significant decreases in their share prices in absolute terms were Nestle Pakistan Ltd (Rs150.00), Sapphire Fibres Ltd (Rs135.00), Pakistan Tobacco Company Ltd (Rs22.60), Service Industries Ltd (Rs17.03), and Al-Abbas Sugar Mills Ltd (Rs13.00). Foreign investors were net buyers, acquiring shares worth $0.16m.
Exporters Driven by Rupee Appreciation: Boost in Confidence with SIFC and Gulf Investments
Sources in the financial sector state that the regular appreciation of the rupee is compelling exporters to sell their dollars in the banking market, thus contributing to the stability of the exchange rate. The financial sector also observes a confidence boost linked to the Special Investment Facilitation Council (SIFC), as business delegations from Gulf countries are exploring opportunities in Pakistan.
Atif Ahmed, a currency dealer in the inter-bank market, emphasized that the daily depreciation of the dollar motivates exporters to sell, as even a 10 paisa difference matters for substantial export proceeds. Exporters in the market are also engaging in forward selling of dollars, and banks express confidence that exporters are not retaining their dollars for better returns.
The financial market gains confidence from the surge in the State Bank of Pakistan’s reserves, positive responses from the IMF, and growing expectations for favorable outcomes from SIFC. Gulf countries’ business delegations visiting Pakistan for investments demonstrate confidence in SIFC, which further boosts foreign investors’ confidence as they consider it immune to legal challenges in the country’s courts.
Positive Economic Indicators and Stability in Pakistan’s Financial Landscape
A known businessman interacting with foreign business delegations highlighted the initiation of corporate farming for foreign investors in Pakistan, particularly in Punjab and Balochistan, showcasing foreign investors’ interest in agriculture. Currency dealers in the open market affirm the stability of the exchange rate, emphasizing the absence of Hundi and Hawala transactions.
Zafar Paracha, Secretary General of the Exchange Companies Association of Pakistan, explained that the increasing reserves of the State Bank of Pakistan and the positive response from the IMF are supporting the local currency. The implementation of a single exchange rate has yielded positive results, stabilizing the exchange rate. Continued crackdowns against illegal currency business and complete blocking of smuggling are expected to maintain stability.
Paracha mentioned that the single exchange rate allows exchange companies to sell significant amounts of dollars to banks, with monthly sales ranging from $300 million to $350 million. Even with an average monthly selling of $300 million, the banking market would receive over $3.5 billion at the end of the fiscal year. Bankers believe that the substantial decline in twin deficits, trade, and current account deficits, is aiding economic managers in meeting debt servicing obligations, with the projected current account deficit for fiscal year FY24 not exceeding $4 billion.