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KSE-100 Ends Week Down Despite Overall Gains, Concerns Mount Over Economic Indicators

Karachi, Pakistan – August 4, 2023 – the Pakistan Stock Exchange (KSE-100) index closed at 145,383 points on Friday, a 0.18% decrease, despite a strong weekly performance that saw the index rise by 3.08% to surpass 145,000 points. The dip came as investors opted to secure profits ahead of the weekend, according to market analysts.

The KSE-100’s weekly gain marks a continuation of positive momentum seen in recent weeks, but is tempered by growing concerns surrounding Pakistan’s macroeconomic stability. The index’s performance this week brings its year-to-date increase to approximately 28%, reflecting a recovery from earlier declines linked to economic uncertainty and political instability.

Key Market Movers

Engro Holdings, Fauji Fertilizer Company (FFC), Oil and Gas Progress Company (OGDC), and MCB Bank were the primary drivers of positive movement, collectively adding 395 points to the index. Conversely, Engro Fertilizers, Lucky Cement, Systems Limited, Mari Petroleum, and hub Power Company (Hubco) exerted downward pressure, subtracting a combined 399 points.

Trading activity was concentrated in OGDC (Rs5.44 billion), FFC (Rs4.68 billion), Pakistan Petroleum (Rs4.19 billion), and Pakistan State Oil (Rs3.57 billion). Pakistan Petroleum led volume with 21.97 million shares traded, closing at Rs188.23 after a loss of Rs1.51.The Bank of Punjab followed with 21.3 million shares traded, closing at Rs13.92,down Rs0.23.Loads Limited saw 20.6 million shares traded, gaining Rs0.73 to close at Rs16.58.

remittances and Seasonal Trends

Remittances from overseas Pakistanis reached $3.2 billion in July,a 7.4% year-over-year increase, but experienced a 6% month-over-month decline. This data, released by the State Bank of Pakistan (SBP) on August 1st, highlights the fluctuating nature of remittance inflows, a crucial source of foreign exchange for the country.

Analysts at Arif Habib Limited (AHL) note that August traditionally marks the beginning of a seasonally weaker period for the KSE-100, lasting through October. support for the index is currently estimated between 143,000 and 145,000,with resistance levels at 146,800-147,000. A breach of the support levels could signal a longer-term downward trend.

MSCI Review and Foreign Investment

Faysal Bank was added to the MSCI Frontier Markets Standard Index in the latest review, increasing Pakistan’s weighting in the index to approximately 6.3% with a total of 27 constituents. This inclusion is expected to attract further foreign investment into Pakistani equities.

Foreign investors recorded a net buying of shares worth Rs33.5 million during the trading day, as reported by the national Clearing Company of Pakistan Limited (NCCPL).

Macroeconomic Concerns Persist

Despite the weekly gains, concerns remain regarding Pakistan’s declining foreign exchange reserves and widening trade deficit. The State Bank of Pakistan’s (SBP) reserves have decreased for three consecutive weeks due to external debt repayments.As of July 28th, SBP reported reserves of $7.8 billion, covering approximately one month of imports.

JS Global’s Muhammad Hasan Ather emphasizes that persistent macroeconomic challenges may limit further upside potential. Investor attention will likely remain focused on currency stability and signals regarding fiscal management from the Ministry of Finance and the SBP. The current trade deficit stands at approximately $8.3 billion for the fiscal year 2023-24 (July-may), according to the Pakistan Bureau of Statistics (PBS).

Trading Summary

Overall trading volumes reached 548.1 million shares, compared to 712.5 million shares the previous day. The total value of shares traded was Rs45.5 billion. Out of 482 companies traded, 151 saw price increases, 296 experienced declines, and 35 remained unchanged.