Karachi – Pakistan’s stock market continued its downward trend, marking its seventh consecutive week of decline as geopolitical uncertainties and concerns over a delayed IMF agreement weighed on investor sentiment. The benchmark KSE-100 index closed at 153,866 points on Friday, a 2.3 percent decrease from the previous week, losing 3,630 points overall.
The ongoing volatility is largely attributed to a combination of factors, including rising global oil prices spurred by tensions in the Middle East and the lack of a Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) for the third review of Pakistan’s $7 billion Extended Fund Facility (EFF). Investors are increasingly cautious as the country’s fiscal outlook remains uncertain.
The market experienced a sharp fall on Monday following a spike in global oil prices, initially prompted by concerns over disruptions in the Middle East. While the market partially recovered after the International Energy Agency (IEA) announced a release of 400 million barrels from strategic reserves and speculation of easing sanctions on Russian oil, the overall sentiment remained negative. The Pakistan Stock Exchange (PSX) data reflects this ongoing pressure.
IMF Review and Economic Indicators
The delay in reaching an SLA with the IMF continues to be a major concern for investors. The State Bank of Pakistan (SBP) maintained its policy rate at 10.5 percent, signaling a cautious approach amid the volatile global environment and regional tensions. This decision reflects the challenging economic situation facing the country.
Despite these concerns, some economic indicators showed positive movement. Remittances in February rose by 5 percent year-on-year to $3.3 billion, while the trade deficit stood at $3 billion for the same month. Exports were valued at $2.3 billion, a decline of 8.5 percent year-on-year, but imports saw a slight reduction of 0.4 percent. However, the overall trade deficit for the fiscal year-to-date increased by 25.3 percent.
February also saw a 13 percent year-on-year rise in petroleum sales, driven by increased demand for petrol and high-speed diesel. Auto sales experienced a significant 42 percent increase year-on-year, although they decreased by 26 percent month-on-month due to the seasonal slowdown during Ramazan.
Market Participation and Sector Performance
Market participation decreased during the week, with the average daily traded volume falling to 548 million shares, compared to 791 million shares the previous week, according to Arif Habib Ltd (AHL). This decline in turnover reflects growing investor apprehension regarding the inconclusive news from the IMF mission.
The SBP’s foreign exchange reserves saw a modest increase, rising by $41 million to reach $16.3 billion. The Pakistani rupee remained relatively stable against the US dollar, appreciating slightly by 0.03 percent to Rs279.31.
Sector performance was mixed. Refinery, leasing companies and jute were among the top performers, with gains of 5 percent, 4.9 percent, and 3.7 percent respectively. Conversely, sectors such as woollen, paper, and transport experienced losses, with declines of 8 percent, 6.8 percent, and 6.7 percent respectively.
Among individual stocks, AICL, Lotte Chemical Pakistan, and Highnoon Laboratories were top performers, rising by 10.1 percent, 9 percent, and 7.1 percent week-on-week. Sazgar Engineering Works, Fauji Cement, and Murree Brewery saw notable losses, with declines of 13.6 percent, 10.6 percent, and 10.5 percent respectively.
Looking Ahead
Analysts at AKD Securities suggest the market’s future direction will largely depend on developments in the ongoing Middle East conflict and the resolution of the IMF review. A de-escalation of tensions in the region could potentially spur a market recovery, given the current appealing valuations, with the KSE-100 index’s forward price-to-earnings ratio standing at 6.6x.
The coming weeks will be crucial as investors await further clarity on the IMF negotiations and monitor the evolving geopolitical landscape. Continued uncertainty is likely to maintain pressure on the Pakistani stock market.
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