KARACHI: Despite mounting political tensions and an unexpected delay in the approval of the Staff-Level Agreement reached with the International Monetary Fund in July for a new $7 billion Extended Fund Facility, the falling T-bill yields and robust corporate results helped the stock market close the outgoing week in green territory.

The non-inclusion of Pakistan in the agenda of the IMF’s Executive Board meeting for August 28 hit market sentiments, given the country’s challenging external debt management position. However, the growing expectations of a third straight interest rate cut kept buying momentum intact during the week.

Arif Habib Ltd (AHL) said the week began under slight market pressure due to Pakistan’s absence from the IMF Executive Board’s schedule, raising concerns about the disbursement of the tranche.

However, sentiments improved midweek when the finance minister announced progress with the IMF, indicating optimism about securing approval from its executive board by September.

This optimism was further strengthened by a T-bill auction later in the week, where cut-off yields dropped by 74-148bps across all tenors, signalling market expectations of a rate cut in the upcoming monetary policy meeting scheduled for September 12.

The State Bank of Pakistan’s foreign exchange reserves increased by $19 million week-on-week to $9.21bn for the period ending Aug 16. However, the central bank didn’t disclose the source of this inflow.

Furthermore, the rupee remained steady at Rs278.5 to a US dollar.

As a result, the benchmark KSE 100 index settled at 78,801.42 points, registering a rise of 756 points or 0.97pc week-on-week.

Sector-wise positive contributions came from commercial banks (369 points), fertiliser (177 points), cement (134 points), leather (79 points) and refinery (47 points).

Meanwhile, the sectors that mainly contributed negatively were automobile assembler (40 points), food and personal care products (34 points), technology (20 points), miscellaneous (11 points) and exploration and production (10 points).

Scrip-wise positive contributors were Fauji Fertiliser Company (197 points), National Bank of Pakistan (164 points), United Bank Ltd (123 points), Services Industries (79 points) and Oil and Gas Development Company (75 points).

Meanwhile, scrip-wise negative contributions came from Mari Petroleum Ltd (108 points), Habib Bank Ltd (65 points), Millat Tractors Ltd (43 points), Systems Ltd (41 points) and Engro Corporation (35 points).

Foreign selling was observed during the outgoing week, clocking in at $0.62m compared to a net buy of $5.26m the preceding week. Major selling was witnessed in fertiliser ($0.92m) and other sectors ($0.92m). On the local front, buying was reported by mutual funds ($3.5m) followed by banks/DFIs ($3.5m).

The average trading volume rose 4.6pc to 578m shares, while the average value traded plunged 25.2pc to settle at $56m week-on-week.

According to AHL, the market will sustain its positive momentum next week, with any developments related to the IMF likely to boost investor sentiment further.

Additionally, as the earnings season continues, select stocks are expected to gain attention, driven by the anticipation of strong results.

Published in Dawn, August 25th, 2024