Karachi – Pakistani shares continued a downward trend for the seventh consecutive week, influenced by geopolitical uncertainties and a delay in securing a crucial financial agreement with the International Monetary Fund (IMF).
Market Performance
The KSE-100 index fell 2.3 percent during the week, closing at 153,866 points – a loss of 3,630 points. The downturn began with a sharp drop on Monday, triggered by rising global oil prices following what was described as illegal US-Israel aggression on Iran and the subsequent closure of the Strait of Hormuz.
While the market saw some recovery, the lack of progress in finalizing a Staff-Level Agreement (SLA) with the IMF for the third review of Pakistan’s $7 billion Extended Fund Facility (EFF) weighed heavily on investor sentiment.
Economic Factors
The State Bank of Pakistan (SBP) maintained its policy rate at 10.5 percent, reflecting caution amid regional tensions and unstable commodity prices. Despite these concerns, remittances in February increased by 5 percent year-on-year, reaching $3.3 billion, and the trade deficit stood at $3 billion for the same month.
Petroleum sales rose 13 percent year-on-year in February, while auto sales increased by 42 percent year-on-year, though they decreased 26 percent month-on-month due to seasonal factors.
Market Participation and Sector Trends
Average daily traded volume decreased to 548 million shares, compared to 791 million shares the previous week, indicating reduced investor participation. The SBP’s foreign exchange reserves increased by $41 million to $16.3 billion, and the Pakistani rupee appreciated slightly by 0.03 percent to Rs279.31 against the US dollar.
Refinery, leasing companies, and jute sectors performed well, with gains of 5 percent, 4.9 percent, and 3.7 percent respectively. Conversely, the woollen, paper, and transport sectors experienced losses of 8 percent, 6.8 percent, and 6.7 percent respectively.
AICL, Lotte Chemical Pakistan, and Highnoon Laboratories were among the top-performing stocks, while Sazgar Engineering Works, Fauji Cement, and Murree Brewery experienced notable declines.
Looking Ahead
Analysts at AKD Securities suggest the market’s future performance is likely to be heavily influenced by developments in the Middle East conflict. A de-escalation of tensions could potentially spur a market recovery, given the current appealing valuations – the KSE-100 index has a forward price-to-earnings ratio of 6.6x. Resolution of the IMF review and efforts towards energy conservation are similarly considered important factors.
Frequently Asked Questions
What caused the decline in the KSE-100 index this week?
The decline was largely attributed to a lack of positive economic developments and the ongoing delay in finalizing a Staff-Level Agreement with the IMF.
How did geopolitical events impact the market?
A spike in global oil prices, prompted by events in the Middle East, initially caused a sharp fall in the index. While the market stabilized somewhat, the overall geopolitical landscape contributed to investor caution.
What is the current status of Pakistan’s foreign exchange reserves?
The SBP’s foreign exchange reserves showed a modest increase, rising by $41 million to reach $16.3 billion.
How will ongoing global events affect the Pakistani stock market in the coming weeks?
