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KARACHI: The rising expectation of an interest rate cut following a steep deceleration in inflation and a stable rupee on surging remittances drove the benchmark KSE 100 index to an all-time high in the outgoing week.
Optimism about a further deceleration in CPI inflation in the current month and the expectation of positive talks with the IMF team next week, which would mark the start of formal negotiations for the new loan programme, fuelled aggressive value-hunting in the last two sessions of the outgoing week.
Arif Habib Ltd (AHL) said market sentiment remained robust during the week, leading the index to close at its highest-ever level of 73,085.50 points. Saudi investors’ arrival in Pakistan to discuss investment prospects set the tone for positive momentum in the market.
On the economic front, headline inflation clocked in at 17.3pc in April, compared to 20.7pc in the same period last year. Analysts expect CPI to further slow to 13-15pc in May, paving the way for a potential cut in the SBP’s policy rate in the upcoming Monetary Policy Committee meeting from the current 22pc.
Moreover, the remittances rose 27.99pc year-on-year to $2.81 billion in April. The country received $23.85 during the first 10 months of FY24, 3.5pc higher than last year.
In addition, the SBP reserves increased by $1.1bn to $9.1bn in the week ending May 3, reflecting the IMF’s disbursement of the final tranche under the Stand-By Arrangement.
The rupee maintained a steady outlook, gaining 0.09 paise or 0.03pc to Rs278.12 against the greenback week-on-week. As a result, the benchmark index surged 1,183 points to close the week at an all-time high of 73,085.50 points.
Sector-wise positive contributions came from pharmaceuticals (272 points), power (164 points), technology (123 points), leather & tanneries (115 points), and cable & electrical goods (56 points). Meanwhile, the sectors that contributed negatively were E&P (132 points) and OMCs (25 points).
Scrip-wise positive contributors were Dawood Hercules (146 points), Service Industries Ltd (115 points), Kot Addu Power (70 points), GlaxoSmithKline Pakistan Ltd (67 points) and Highnoon Laboratories Ltd (63 points). Meanwhile, scrip-wise negative contributions came from Engro Fertilisers (122 points), Oil and Gas Development Company Ltd (59 points), Meezan Bank Ltd (48 points), Mari Petroleum Ltd (40 points) and Pakistan Petroleum Ltd (39 points).
Foreigner buying continued during the outgoing week, clocking in at $2.7m compared to a net buy of $8.0m last week. Significant buying was witnessed in fertiliser ($2.2m) and cement ($1.4m). On the local front, selling was reported by ‘other organisations’ ($4.7m) followed by brokers ($1.9m).
Going forward, the AHL expects the market sentiment to remain positive in the upcoming week as investors will closely monitor developments related to a new IMF programme, investments from Saudi Arabia and Qatar, and the upcoming budget 2024-25.
Published in Dawn, May 12th, 2024
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