KARACHI: Despite some benchmark slippages, better-than-expected smooth talks with the visiting International Monetary Fund (IMF) mission for the release of the second tranche of $1.1 billion enthused positive vibes among equity investors about the economic outlook, aiding the benchmark index maintain a bullish performance in the outgoing week.

Despite early volatility, the market turned bullish on reports that the government plans to reduce energy sector circular debt by negotiating a loan deal with the banks.

Arif Habib Ltd (AHL) said the market wrapped up the week positively, supported by improved domestic liquidity and favourable investor sentiment surrounding discussions on the IMF’s visit for the first review under the $7bn Extended Fund Facility.

Inflation in February slowed to 1.5pc year-on-year, the lowest since September 2015 (1.3pc). At Wednesday’s T-bill and Pakistan Investment Bond auctions, investors offered a staggering Rs2.207 trillion bids mostly for the long-term tenors, with yields on three-month bills remaining unchanged. At the same time, six- and 12-month papers saw a decrease of 1bps each.

The country’s trade deficit widened by 6.3pc year-on-year to $15.8bn in 8MFY25. On a positive note, OMC sales grew by 4pc year-on-year during the same period. However, urea and DAP sales declined by 37pc and 64pc year-on-year, respectively.

Furthermore, the SBP’s foreign exchange reserves increased by $27m week-on-week, settling at $11.2bn, while the rupee depreciated slightly by 0.05pc, closing at 279.82 against the dollar.

As a result, the KSE-100 index closed at 114,399 points, a gain of 1,147 points, or 1.01pc week-on-week.

Although the Pakistan Stock Exchange (PSX) experienced volatility early in the week, it closed in the green on investor optimism about expectations of a potential rate cut in the upcoming State Bank of Pakistan’s (SBP) Monetary Policy Committee MPC meeting on March 10.

The other positive factor was the government’s efforts to eliminate circular debt in the power sector by borrowing Rs1.25 trillion from commercial banks at an interest rate of 10.8pc. This development triggered a rally in oil and gas exploration, cement and oil and gas marketing companies sectors.

According to AHL, sector-wise positive contributions came from exploration and production (656 points), cement (451 points), OMCs (346 points), power (177 points), and glass (114 points). Meanwhile, the sectors that contributed negatively were technology and communication (122 points), textile (97 points), autos (89 points), and commercial banks (48 points).

Scrip-wise positive contributors were Pakistan Petroleum Ltd (290 points), PSO (247 points), Oil and Gas Development Company (236 points), Hub Power (185 points), and Fauji Cement Company (156 points). Whereas, scrip-wise negative contributions came from Systems Ltd (84 points), Millat Tractors (77 points), Mehmood Textile (75 points), Bank Al-Habib Ltd (74 points), and United Bank Ltd (64 points).

Foreigner selling continued clocking in at $5.3m compared to a net sell of $6.0m last week. Significant selling was witnessed in E&P ($2.7m), followed by commercial banks ($2.3m). On the local front, buying was reported by banks/DFIs ($43.4m) and companies ($7.5m).

The average trading volume was down 41pc to 291m shares while the value traded dipped 24.2pc to $65m week-on-week.

The market will likely sustain its positive momentum next week amid anticipation of further softening of monetary policy on Monday. Moreover, the ongoing IMF mission and the first review of the bailout programme likely bolster investor confidence.

According to AKD Securities, the market is expected to maintain its positive trajectory, driven by an anticipated shift of funds from fixed-income to equities amid falling fixed-income yields. With easing inflation, the upcoming MPC meeting will remain a key focus.

Published in Dawn, March 9th, 2025