PSX records mixed trends amid profit-taking

KARACHI:

Pakistan Stock Exchange (PSX) endured a subdued performance in the outgoing week as it registered a marginal decline of 0.34% week-on-week (WoW) and closed at 114,880 points.

Market activity began on a positive note, driven by optimism over a potential rate cut in the upcoming monetary policy committee meeting, but profit-taking reversed early gains. Global and local developments played pivotal roles in shaping market sentiment. A 3% WoW drop in global oil prices, triggered by US President Donald Trump’s announcement to boost domestic production, piled pressure on Pakistan’s energy sector.

Domestically, the State Bank of Pakistan (SBP) raised Rs326 billion in the treasury bill auction, where cut-off yields signalled a potential easing in monetary policy.

On a day-on-day basis, bulls dominated proceedings at the PSX on Monday as investors took encouragement from relative political stability and a marked improvement in macroeconomic indicators. Market players resorted to cherry-picking of stocks, helping the KSE-100 index to add 573 points. Next day, the stock market came under selling pressure as the index lost over 800 points due to profit-taking by investors and caution ahead of monetary policy announcement next week.

On Wednesday, the bourse engaged in highly bearish trading, reflecting investor concerns over the Tax Laws Amendment Bill, which sought to bar non-filers from making stock purchases beyond certain limits. Analysts attributed the market’s downturn of nearly 1,600 points to apprehensions surrounding the legislative change, alongside broader economic challenges such as rupee instability, weaker global crude oil prices and political uncertainty.

The following day, the PSX made a modest recovery in an earnings season rally, influenced by the drop in bond yields and expectations of industrial power tariff reduction. The index gained 594 points. On final trading day of the week, the market extended its bullish trend as the index surged nearly 850 points over investor optimism fueled by expectations of a significant policy rate cut, ranging between 100 and 150 basis points.

The benchmark KSE-100 index closed at 114,880, down 392 points, or 0.34% WoW.

Arif Habib Limited (AHL) wrote, in its commentary, that the stock market started the week on a positive note amid expectations of further rate cut in the monetary policy committee meeting next week. However, brief profit-taking during the week reversed the momentum. International crude prices recorded a 3% WoW contraction amid concerns over Trump’s plans to boost US oil production, it said. Furthermore, Pakistan agreed to terms of $1 billion worth of loans with two Middle Eastern banks. In T-bill auction, the SBP raised Rs326 billion against the target of Rs350 billion, where cut-off yields were set at 11.59% for three-month bills, 11.40% for six-month bills and 11.39% for 12-month papers.

In addition, Pakistan’s textile exports increased 9.7% year-on-year (YoY) in 1HFY25 and settled at $9.1 billion. Power generation edged up 1% YoY in December 2024 while the State Bank of Pakistan’s (SBP) reserves dropped $276 million to $11.4 billion, AHL said.

Foreigners’ buying was witnessed during the week, which came in at $5.6 million compared to net selling of $9.7 million last week. Major buying was witnessed in cement companies ($3.9 million) and exploration and production firms ($1.7 million), AHL added.

Wadee Zaman of JS Global commented that the KSE-100 index experienced mixed trends during the outgoing week. Among major economic news, foreign direct investment recorded a net inflow of $170 million in December 2024, reflecting a 33% YoY decline. However, it rose 20% YoY during 1HFY25.

The finance minister remarked that Pakistan had planned to launch Panda bonds of around $200-250 million by the end of current fiscal year. The week witnessed uncertainty about the implications of amendments to the tax bill regarding non-filers, which adversely impacted market sentiment. In other news, the IMF revised Pakistan’s GDP growth forecast downwards from 3.2% to 3% for FY25.