Karachi, January 27, 2024 – Investors in Pakistan are eagerly awaiting the upcoming monetary policy decision scheduled for January 29, 2024, as it is expected to be a key driver for the stocks in the coming week.
While various polls indicate that the State Bank of Pakistan (SBP) is likely to maintain the policy rate at 22 percent, there is speculation among some analysts that a surprise cut in the policy rate may be on the horizon.
Analysts at Arif Habib Limited noted that the market experienced a rally at the beginning of the week, buoyed by reports of the government planning to inject PKR 1,250 billion into the energy sector to alleviate circular debt. However, mid-week saw a reversal in market sentiment as the Ministry of Finance raised objections to the energy department’s circular debt resolution plan. Concurrently, there was a noticeable decline in cut-off yields for the 3-month, 6-month, and 12-month MTBs by 50bps, 56bps, and 62bps, respectively. The SBP’s reserves also increased by USD 243 million, reaching USD 8.2 billion. Despite the fluctuations, the Pakistani Rupee closed at 279.59 against the USD, strengthening by PKR 0.30 or 0.11 percent WoW. The market closed at 63,813 points, marking a climb of 531 points or +0.84 percent WoW.
Sector-wise, positive contributions were observed from Oil & Gas Exploration (319 points), Commercial Banks (273 points), Fertilizer (114 points), Cement (30 points), and Leather & Tanneries (25 points). Conversely, negative contributions came from Technology & Communication (124 points), Power Generation & Distribution (63 points), Miscellaneous (33 points), Automobile Assembler (28 points), and Paper & Board (13 points). Notable scrip-wise positive contributors included OGDC (336 points), EFERT (131 points), BAHL (114 points), MEBL (75 points), and HMB (63 points). Conversely, scrip-wise negative contributions came from PPL (81 points), SYS (66 points), FFC (55 points), HUBC (41 points), and PSO (32 points).
Foreign selling persisted during the week, totaling USD 22.7 million compared to a net sell of USD 1.2 million in the previous week. Major selling was observed in Commercial Banks (USD 6.7 million) and Fertilizer (USD 4.5 million). On the local front, buying was reported by Insurance Companies (USD 9.6 million) followed by Companies (USD 8.1 million). Average trading volumes increased to 416 million shares, up by 6.9 percent WoW, while the average value traded settled at USD 73 million, up by 47.5 percent WoW.
As the market awaits the monetary policy decision, investors remain cautious amid the potential for surprises that could influence market dynamics. The outcome of the decision is likely to have a significant impact on stock movements in the upcoming week.
