KARACHI: A positive review of the economy by the International Monetary Fund (IMF) and progress on the resolution of energy sector circular debt kept equity investors bullish, driving the benchmark KSE 100 index to scale an all-time high near 119,000 in the outgoing week.

The Pakistan Stock Exchange (PSX) continued its northward journey for the sixth week. The index, which reached an intra-week all-time high of 119,406 after opening at 115,958, fell to an intra-week low of 115,883. Ultimately, it closed at 118,442.18, adding 2,906 points or 2.52 per cent week-on-week.

Arif Habib Ltd (AHL) said the market sentiment was supported by expectations of a Staff-Level Agreement (SLA) between Pakistan and IMF following the conclusion of the first review under the $7 billion Extended Fund Facility, which will be a road to disbursement of the second tranche of $1.1bn.

The IMF shared a draft of the Memorandum of Economic and Financial Policies (MEFP ) with the government, signalling progress. Furthermore, the potential resolution of power circular debt fuelled the positive sentiment.

The Fund has given a nod to the government to recalibrate its tax collection target for FY25 to Rs12.35 trillion from Rs12.97tr.

Meanwhile, the Large-Scale Manufacturing contracted 1.2pc year-on-year in January.

In recent weeks, the country faced a new wave of terrorist attacks, mainly in Khyber Pakhtunkhwa and Balochistan, which is shaking foreign investors’ confidence and well reflected in the 45pc year-on-year plunge in Foreign Direct Investment (FDI) to $95 million in February.

The major economic indicators showed improvement, but the country is still not out of wood, as the Large-Scale Manufacturing (LSM) sector remained negative in the first seven months of FY25 despite a sharp reduction in the State Bank of Pakistan’s policy rate to 12pc from an unprecedented 22pc in June 2024.

However, the business community consistently urged the government to reduce the interest rate to single digits to revive economic activities as the inflation slowed to 1.5pc in February. However, the central bank disappointed the business community by delivering a surprise status quo in its March 10 meeting, citing high core inflation.

AKD Securities Ltd said the market’s performance remained strong throughout the week. However, profit-taking was seen on the last trading day.

The optimism was driven by expectations of a successful conclusion of the IMF review, where revisions to macroeconomic targets under the MEFP were presented, including downward adjustments to annual tax collection targets, inflation, and GDP growth. An extra $1.0-1.5bn under climate financing was also discussed.

Additionally, positive momentum was also driven by the IMF’s approval of the government’s plan to borrow Rs1.25tr from commercial banks to resolve circular debt, which led to a rally in the E&P and OMC sectors, contributing 1,086 points and 208 points, respectively.

On the macroeconomic front, the current account deficit for February was reported at $12m, taking the 8MFY25 surplus to $691m. Moreover, fertiliser offtakes dropped 36pc year-on-year during February, where urea offtakes clocked in at 347,000 tonnes, down 36pc year-on-year. Auto financing increased by 3pc month-on-month in February, marking a rise for the second consecutive month.

On the forex front, SBP-held reserves rose by $49m week-on-week, settling at $11.15bn.

According to AHL, the sector-wise positive contributions came from E&P (1,086 points), technology (416 points), power (273 points), OMCs (213 points), and cement (202 points). Meanwhile, the sectors that contributed negatively were fertiliser (105 points), and insurance (6 points). Scrip-wise positive contributors were Mari Energies (696 points), Systems Ltd (328 points), Hub Power (251 points), OGDC (186 points), and Lucky Cement (184 points). Whereas scrip-wise negative contributions came from Engro Fertiliser (124 points), United Bank Ltd (60 points), Fatima Fertiliser (29 points), Colgate Palmolive (18 points), and Habib Bank (16 points).

Foreigner selling continued clocking in at $7.96m compared to a net sell of $2.61m last week. Major selling was witnessed in commercial banks ($2.9m), followed by E&P ($2.3m). On the local front, buying was reported by banks/DFIs ($176.4m) and other organisations ($1.5m).

The average trading volume surged 51pc to 508m shares while the value traded up 43pc at $112m week-on-week.The market will likely stay positive next week. According to AHL, the market participants will closely follow developments leading up to SLA with the IMF, which is projected to keep the momentum buoyant. The KSE-100 is currently trading at a price-to-earnings ratio of 6.4x compared to its 10-year average of 8.0x, offering a dividend yield of 8.1pc compared to its 10-year average of 6.5pc.

Published in Dawn, March 23rd, 2025