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Lacklustre week drags PSX downward

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  • Investors remained on the sidelines in outgoing week.
  • Moody’s decision, rupee-dollar party played on investors’ minds.
  • KSE-100 index declined 137 points or 0.3%.

KARACHI: The Pakistan Stock Exchange (PSX) witnessed tepid trading in the outgoing week as Moody’s rating kept market participants mostly on the sidelines.

Moody’s decision, fluctuating rupee-dollar parity, and dwindling foreign exchange reserves played on investors’ minds during the week. Resultantly, the KSE-100 index declined 137 points or 0.3% to end the week at 41,948.50 points.

The market commenced the week on a positive note as investors’ interest revived on optimism that the State Bank of Pakistan (SBP) would maintain a status quo in its monetary policy announcement.

Investors’ interest was also fuelled by a statement from Finance Minister Ishaq Dar that Pakistan would not seek debt restructuring from the Paris Club and would meet all multi-lateral and international payment obligations.

The stock market, however, reversed the trend on Tuesday as investors opted for profit-booking owing to political and economic uncertainty.

Lacklustre week drags PSX downward

The market extended losses as selling pressure continued to dominate as investors remained concerned over Moody’s downgrading five of Pakistan’s major banks. Investors took a cautious stance and resorted to value buying which led to some recovery during Wednesday’s session.

The bourse bounced back on Thursday and cushioned the dip amid renewed interest in selected stocks of the technology sector.

The index reversed its direction once again on the last trading session as a lack of positive triggers kept market players away from healthy participation, providing bears with an opportunity to dominate most of the trading session.

Other major developments during the week were: PSO wins arbitration case against Gunvor over LNG payments, Securities and Exchange Commission of Pakistan (SECP) registered 2,434 new firms in September, gas condensate discovered in Sanghar, inflation rate at 19.9%, IMF projected 3.5% growth for 2023.

Meanwhile, foreign buying continued this week, clocking in at $12.3 million against a net buy of $4.7 million recorded last week. Buying was witnessed in technology ($12.4 million), power (0.8 million), and cement ($0.3 million).

On the domestic front, major selling was reported by broker proprietary trading ($4.8 million), followed by companies’ finance institutions ($4 million).

During the week under review, average volumes clocked in at 267 million shares (down by 39% week-on-week), while the average value traded settled at $44 million (down by 7% week-on-week).

Major gainers and losers of the week

Sector-wise negative contributions came from technology and communication (-117 points), commercial banks (-48 points), tobacco (-32 points), cement (-15 points), and engineering (-12 points)

On the flip side, positive contributions came from exploration and production (+46 points) and refinery (+22 points)

Scrip-wise major losers were TRG Pakistan (-207 points), Pakistan Tobacco Company (-32 points), Meezan Bank (-24 points), Engro Fertiliser (-19 points), and Engro Corporation (-18 points).

Meanwhile, gainers were Systems Limited (+83 points), Pakistan Oilfields (+20 points), Lotte Chemical (+17 points), Oil and Gas Development Company (+16 points), and Nestle Pakistan (+15 points).

Outlook for next week

A report from Arif Habib Limited stated that the market is expected to remain positive in the upcoming week,” given the anticipation of FATF decision over the expected exit of Pakistan from the grey list.”

“Moreover, with the ongoing result season, certain sectors and scrips are expected to stay under the limelight given the anticipation of robust results,” it said.

“The KSE-100 is currently trading at a PER of 4.1x (2023) compared to the Asia-Pacific regional average of 12x while offering a dividend yield of 9.8% versus 3% offered by the region,” the brokerage house stated.

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Moody’s says the IMF programme will increase Pakistan’s foreign financing.

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Moody’s, a reputable international rating agency, has stated that Pakistan’s chances of acquiring funding will increase as a result of the recent agreement with the International Monetary Fund (IMF), which offers dependable sources for that purpose from both friendly countries and international financial institutions.

According to a recent Moody’s analysis on Pakistan’s economy, social unrest and tensions could result from Pakistan’s ongoing inflation. The country’s economic reforms may be hampered by increased taxes and potential changes to the energy tariff, it continued.

Moody’s, on the other hand, agrees that the coalition government headed by Shehbaz Sharif of the PML-N is in danger of failing to secure an election mandate, which may potentially undermine the successful and long-lasting execution of economic reforms.

The government’s capacity to proceed with economic changes may be hampered by societal unrest and poor governance, according to Moody’s.

In order to appease the IMF by fulfilling a prerequisite for authorising a rescue package, the government raised the basic tariff on electricity, which coincided with the most recent increase in fuel prices announced on Monday. This report was released by Moody’s.

Food costs have increased in the nation, where the vast majority is experiencing an unprecedented crisis due to the high cost of living, following the government’s earlier presentation of a budget that included a large increase in income tax for the salaried classes and the implementation of GST on commodities like milk.

The most recent comments were made following Islamabad’s achievement of a staff-level agreement for a $7 billion contract that spans 37 months and is contingent upon final approval by the IMF Executive Board.

It states that Pakistan will need foreign financing totaling about $21 billion in 2024–2025 and $23 billion in 2025–2026, meaning that the country’s present $9.4 billion in reserves won’t be sufficient to cover its needs.

Therefore, according to Moody’s, Pakistan is in an alarming position with regard to its external debt, and the next three to five years will be extremely difficult for the formulation and implementation of policies.

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Base Of bilateral relations: China And Pakistan Reiterate Their Support For CPEC

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China-Pakistan economic corridor is a major project of the Belt and Road Initiative, and both countries have reiterated their commitment to it. It remains a fundamental aspect of their bilateral relations.

Vice Chairman Zhao Chenxin of the National Development and Reform Commission of China and Minister Ahsan Iqbal of Planning and Development met in Beijing, where Ahsan Iqbal made this assurance.

The summit made clear how committed China and Pakistan are to advancing their strategic cooperative partnership in all weather conditions.

The focus of the discussion was on how the CPEC was going, with both parties reviewing project development and discussing how the agreement made at the leadership level will lead to the launch of an enhanced version of the CPEC.

In order to improve trade, connectivity, and socioeconomic growth in the area, they emphasised the need of CPEC projects.

The Ml-I Project, the KKH realignment, and the Sukkur-Hyderabad motorway—the last remaining segment of the Karachi-Peshawar motorway network—were all to be expedited.

Expanding the partnership’s horizons to include technology, innovation, education, connectivity, and renewable energy sources was another topic of discussion.

Specifically in the special economic zones being built under the Comprehensive Economic Cooperation (CPEX), Vice Chairman NDRC emphasised the possibility of China investing more in Pakistan.

In addition to expressing confidence in the ongoing success of the two nations’ collaboration, Zhao Chenxin reiterated China’s support for Pakistan’s development aspirations.

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Pakistani government raises petrol prices

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A recent announcement states that the price of petrol has increased by Rs 9.99 per litre, to Rs 275.60 per litre.

The cost of high-speed diesel has also increased significantly, rising by Rs 6.18 a litre. Diesel is now priced at Rs 283.63 a litre.

Furthermore, kerosene now costs Rs 0.83 more per gallon.

The cost of products and services is predicted to rise in response to the increase in petroleum prices, further taxing household budgets and jeopardizing the stability of the economy.

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