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Stocks to track follow-through on financial aid commitments

Shahid Shah
Sunday, Apr 09, 2023

Stocks closed almost flat during the outgoing week as the IMF programme remains unclear, with the upcoming week likely to move around the commitments of the friendly countries for financial aid, traders said.

“With Saudi Arabia committing to provide financial aid, the market participants will be waiting for additional commitments from other friendly countries,” said Arif Habib Ltd, a brokerage house. “Commitments from other friendly countries will complete the final pre-requisite for a revival of the IMF programme, lifting the sentiment of the local bourse.”

The market commenced on a negative note as participants expected an interest rate hike in the monetary policy. Furthermore, noise on the political front dragged the negative momentum, it reported.

However, the market witnessed a rally post lower than expected jump in the policy rate (100bps hike). Meanwhile, the commitment of funds worth $2 billion from Saudi Arabia gave a boost to the bullish sentiment of the market as bridging the external financing gap remains one of the conditions to complete the ninth review of the IMF programme.

Trade deficit dropped by 60 percent year-on-year to $1.46 billion in March 2023 (lowest since February 2015). However, the momentum was short-lived after Finance Minister cancelled a trip to the US to meet the World Bank/IMF team. The rupee also depreciated against the dollar by Rs0.63 or 0.22 percent WoW, closing the week at 284.42/USD.

The market closed at 40,050 points, up by 49 points or 0.12 percent WoW. Average volumes arrived at 110 million shares (up 19 percent WoW) while the average value traded settled at $10 million (down 14 percent WoW).

Foreign buying was also witnessed during this week, clocking in at $4.7 million compared to a net sell of $0.15 million last week. Major buying was witnessed in exploration and production companies ($3.0 million) and banks ($0.8 million). On the local front, selling was reported by insurance ($4.8 million) followed by companies ($2.8 million).

Sector-wise positive contributions came from oil and gas exploration companies (149 points), technology and communication (90 points), power generation and distribution (45 points), fertiliser (41 points), and

(32 points). Scrip-wise positive contributors were Pakistan Petroleum Limited

(71 points), Oil and Gas Development Company (69 points), Systems Limited (51 points), Hubco (43 points) and TRG (40 points).

The sectors which contributed negatively were auto assembler (22 points), tobacco (17 points), and commercial banks (14 points). Meanwhile, scrip-wise negative contributions came from Bank Al abib Limited (36 points), Millat Tractors Limited (19 points), Pakistan Tobacco Company (17 points), Javedan Corporation Limited (8 points), and Ghani Glass Limited (8 points).

According to the Arif Habib Ltd, its preferred stocks are Oil and Gas Development Company, Pakistan Petroleum, Mari, MCB, Faisal Bank, Meezan Bank, Bank Alfalah, Lucky Cement, Maple Leaf Cement, Fauji Cement, Engro, Fauji Fertilizers, HUM Network, Hubco, PSO, and SNGPL.

Analyst Nabeel Haroon at Topline Securities said investor participation remained at the lower end due to the ongoing month of Ramazan (limited trading hours), ongoing political uncertainty (provincial elections in Punjab and Khyber Pakhtunkhwa) and delay in the IMF programme.

Meanwhile, CPI for the month of March 2023 clocked in at 35.4 percent YoY, PARCO closed down the refinery for five days, sales of petroleum products dropped 39 percent, SBP forex reserves fell by $36 million to $4.2 billion, and OGDC engaged Chinese firm to complete Uch-1 gas project.