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Pakistan Stock Exchange Posts 2.8% Drop in WoW – OpEd – Eurasia Review

Pakistan Stock Exchange Posts 2.8% Drop in WoW – OpEd – Eurasia Review
Pakistan Stock Exchange Posts 2.8% Drop in WoW – OpEd – Eurasia Review


The Pakistan Stock Exchange remained lackluster throughout the week ended June 7, 2024, closing at 73,754 points, with the benchmark index losing 2,124 points or 2.8% WoW.

This downward pressure was mainly due to concerns over the potential removal of the final tax status of CGT and dividends, which would bring their tax rates in line with the normal rate of income tax.

Additionally, Moody's statement suggesting a status quo at the upcoming Monetary Policy Committee (MPC) meeting also put some pressure on the market. These negative aspects overshadowed the positive developments during the week.

On the macroeconomic front, inflation in May 2024 fell to a 30-month low of 11.8% year-on-year, resulting in positive real interest rates above 1,000 basis points. This fueled market participants' expectations for rate cuts at the June 10 MPC meeting.

In addition, the announcement of monetary easing by developed economies, notably the European Central Bank and the Bank of Canada, amplified this feeling.

May's trade deficit narrowed 15% month-on-month to $2.1 billion, while remittances hit a record $3.2 billion, pointing to a further surplus potential of the current account, which raises hopes that the current account for FY24 could close in surplus.

As the FY25 budget approaches, new fiscal measures have emerged: the IMF is demanding an additional PKR 2 trillion in revenue, while local authorities are considering additional taxation of PKR 1.4 trillion.

With overall market volatility, stakes also declined by 5.3% on WoW, with the average daily volume traded falling to 423 million shares from 447 million shares a week ago.

On the currency front, the PKR appreciated by 0.05% to close at 278.2/US$.

Other major news feeds during the week include: 1) FBR tax collection in May exceeded target of RPK 15.21 billion, 2) Pakistan to repay $10 billion in here July, 3) Sales of petroleum products in May increased by 7% to 1.39 million tonnes. YoY, and 4) Cement sales increased by almost 8% in May.

The best performing sectors included: paper and board, jute and textile spinning, while the best performing sectors included: Inv. Banks/Securities Companies, E&P and Refinery

Significant net sales were recorded by individuals with a net sale of US$8.9 million. Insurance and banks/DFIs absorbed the majority of sales with a net purchase of US$7.0 million and US$6.8 million.

The best performing scripts of the week were: YOUW, SHEL, MTL, SEARL and TRG, while the laggards were: CEPB, FFBL, PSX, PIBTL and OGDC.

Looking ahead, the upcoming MPC meeting on June 10 will be in the spotlight, with any rate cut expected to shift market focus towards cyclical sectors.

Additionally, the 2025 federal budget will significantly influence investor confidence. Given the current uncertainties, the market is expected to remain volatile in the near term, with clarity expected to emerge after the budget announcement. Until then, AKD Securities advises investors to take a wait-and-see approach, although any correction should be viewed as a value buying opportunity.




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