Week ahead: Politics to drive stocks, economic bumps persist

• Stock market expected to remain range-bound.
• Any positive news from Saudi, IMF to boost market.
  
• Market remained jittery in outgoing week on politics.
  

Stocks are forecast to stay mostly idle as caution may reign supreme in view of perilously low foreign exchange reserves, an extended drought of inflows, and a cadaverous rupee amid a raging political standoff between the government and the opposition party fiercely campaigning for early elections.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index closed at 42,150 points, down by 452 points (-1.1%) week-on-week.

Analysts see the bourse on the back foot next week as investors are going to gauge the situation on the ground through a biased lens before moving in for any forays as valuations are still hot owing to recent erratic trends.

“The equity bourse is expected to remain range-bound in the upcoming week as market participants will remain cautious due to the political noise in the country,” Arif Habib Limited, a brokerage, said in its weekly market report.

It said any positive news coming from Saudi Arabia and International Monetary Fund’s (IMF) ninth review will benefit the market.

The KSE-100 is currently trading at a PER of 4.0x (2023) compared to Asia Pac regional average of 12.9x while offering a dividend yield of ~10.2% versus ~2.8% offered by the region, according to the brokerage.

The market remained jittery in the outgoing week, even though Pakistan repaid its $1 billion international bond on time and Saudi Arabia extended its $3 billion deposit to the State Bank of Pakistan (SBP).

The market remained under pressure mainly due to uncertainty over the IMF deal and political noise. However, the market turned positive midweek as Russia agreed to sell oil to Pakistan at a discounted price, but this positive momentum did not sustain.

Furthermore, SBP’s foreign exchange reserves data showcased a decline of $784 million hitting nearly a four-year low of $6.72 billion.

With this, the rupee depreciated against the greenback by Rs0.71 or 0.32% week-on-week to settle at Rs224.4.

Sector-wise negative contributions came from cement (109 points), power generation and distribution (61 points), pharmaceuticals (60 points), technology and communication (57 points), and automobile assemblers (45 points).

Whereas, sectors that lifted the index were miscellaneous (131 points) and automobile parts and accessories (3 points).

Scrips that added to the losses were Habib Bank Ltd (55 points), System Limited (54 points), Hub Power Company (50 points), Meezan Bank Limited (43 points), and Millat Tractors Limited (36 points).

Meanwhile, stocks that supported the market came from Pakistan Services Limited (137 points), Bank Al-Habib Limited (33 points), United Bank Limited (27 points), Bank Al-Falah Limited (12 points), and Habib Metro Bank (11 points).

Foreign selling clocked in at $6.3 million compared to a net buy of $6.6 million last week.

Major selling was witnessed in commercial banks ($10.3 million), cement ($0.2 million), and all other sectors ($0.5 million).

On the local front, buying was reported by individuals ($8.8 million) followed by insurance companies ($1.3 million).

Average volumes swelled to 180 million shares, up 11% week-on-week, while the average value traded settled at $18 million, down 22% week-on-week.