KARACHI: After bleeding for seven consecutive weeks, Pakistan equities posted a sharp recovery as optimistic investors rushed to accumulate stocks on seemingly attractive valuations, pushing the benchmark KSE-100 index up 2,537 points or 7.6 percent to close the week ended May 24, 2019 at 35,704 levels.[the_ad id=”31605″]“The market support fund remained the chatter on the street, muting even the impact of the State Bank’s decision to increase the policy rate by 150bps, announced earlier in the week,” Ali Zaidi at JS Global Capital said.
This chatter stimulated market activity where average daily traded volume increased by 66 percent to 178 million shares/day while daily traded value averaged at US$40 million during the week.
To note, revival of investors’ confidence came on the back of a meeting held between stock brokers and Advisor to PM on Finance Hafeez Sheikh to form a PSX support fund for market stabilization along with approval of deferred oil payment facility of US$ 3.2 billion with Saudi Arabia which will ease pressure on balance of payments’ and foreign exchange reserves.
Foreign buying continued this week clocking-in at US$ 0.02 million compared to a net buy of US$ 8.21 million last week.
Foreign exchange reserves with the State Bank of Pakistan (SBP) declined by US$788 million or 9.0 percent during the week ending May 17, 2019 to settle at US$8.06 billion. As foreign reserves with commercial banks remained mostly stagnant during the period, total foreign reserves in the country declined 4.8 percent to settle at US$15.13 billion.
The PKR weakened sharply against the US Dollar as it made a record high of 152.50 in the interbank market before stabilizing.
Other noteworthy news during the week include: Kekra-1 drilling finds water-wet reserves; the government’s decision to end subsidies offered to zero rated sectors; proposal to hike gas tariffs by 47 percent; announcement that Saudi Arabia’s three year deferred oil facility will commence on 1st July; proposal to launch lower-grade fuel for motorcycles; government borrows a record Rs3.1 trillion in the recent T-Bill auction; execution of Petroleum Concession Agreement (PCA) with Kuwaiti company and announcement that the FY-20 budget would be presented in the National Assembly on June 11th.
“We view the market to remain positive in the upcoming weeks amid activation of a PSX stabilization fund in the foreseeable future along with contraction in the Current Account Deficit (CAD) by 27 percent in 10MFY19 which may improve investor sentiments.
“However, economic concerns are still hovering around for instance endless slide of PKR against the Green Back and further rate hikes expected with inflation expected to tick higher post adjustment in utility prices,” a report issued by Arif Habib Limited said.