PSX may witness overdue rally this week

Minute Mirror - Subscribe
Minute Mirror - Subscribe

After closing the third week in the green zone, the Pakistan Stock Exchange (PSX) is likely to remain in positive territory during the week starting today (Monday) amid a plethora of positive news.

The government on Sunday said that an agreement had been reached with the Tehreek-e-Labbaik Pakistan (TLP) after the latest round of dialogue between the two parties. The TLP protests kept the PSX under pressure during the last week and dented the investors’ confidence. The positive development in this regard is likely to benefit the bourse.

The PSX announced on Saturday to switch trading back to Karachi Automated Trading System (KATS). The market suffered last week due to technical issues in the newly installed system, JADE Trading Terminal (JTT), and trading remained suspended for two and a half hours on Wednesday last week. Although 18 mock sessions were held prior to installation of the system, the system suffered in real time when there were hundreds of millions of volumes to be handled. The restoration of KATS shall take effect from November 1 and shall remain in force till further notice.

The new trading system was installed on Monday last week in order to integrate local bourse with regional and international stock markets while ensuring improved security features for better safeguarding investors’ data. However, the user experience presented a completely different story.

Again, the $4.2 billion Saudi package helped stop consistent rupee depreciation against the US dollar. Riyadh on Tuesday announced that it would deposit $3 billion in the State Bank of Pakistan (SBP) and provide an oil credit facility of $1.2 billion to aid Pakistan’s economy and ease the pressure on foreign exchange reserves. This announcement changed things altogether in the next three sessions with the rupee recovering Rs3.62 till Friday. This is likely to improve investors’ confidence by bringing improvement in import bill.

Again, expectation of positive conclusion of talks between Pakistan and the International Monetary Fund (IMF) for the resumption of the Extended Fund Facility (EFF) and ongoing result season, which is likely to be concluded this week, are other drivers that can keep the PSX in green territory. Although the interest rate may rise following the IMF package, it will surely benefit the banking sector.

Moreover, coal prices are coming down, which have reduced from $250 a metric tonne to around $180 a metric tonne recently. This reduction will benefit the cement and power sectors. Again, the pressure of futures rollover week is over, and the rally which was due last week, may be expected this week.

However, the inflationary figures continued remaining on a higher side as weekly inflation surged by 1.23 percent for the fourth straight week ending on October 28, 2021, while it went 14.31 percent up on a year-on-year basis. Earlier, during the previous weeks ending on October 21, October 14 and October 07, the weekly inflation went up by 1.38 percent, 0.20 percent and 1.21 percent, respectively.

The stocks closed the third consecutive week in the green zone and the benchmark KSE-100 Index gained 606 points (+1.3 percent) during the week to close at 46,184.71 points. The traded volume on the bourse averaged at 202 million shares per day (down 33 percent), while the average value of traded shares declined 37 percent to $40 million.

The market ended the month by gaining 1,285 points (+2.86 percent) to close above the psychological barrier of 46,000 mark. However, all share average traded volume remained relatively lower to stand at 276 million shares per day during October.