Karachi – Pakistan’s stock market concluded a shortened week on a flat note, buffeted by security concerns and a lack of positive catalysts. The benchmark KSE-100 index shed 45 points, or 0.02%, closing at 184,130 on , following a national holiday for Kashmir Day.
The primary drag on investor sentiment stemmed from Barrick Gold’s announcement that it would review its Reko Diq copper-gold project in Balochistan, prompted by a recent escalation in security incidents. This development triggered anxieties about the viability of large-scale foreign investment in the region. Adding to the unease was a bomb blast in Islamabad during Friday prayers, further heightening concerns about the country’s internal security environment.
Despite briefly trading in positive territory earlier in the week, the KSE-100 lost momentum as these unfavorable developments unfolded. According to Arif Habib Ltd (AHL), the index’s performance was hampered by both domestic and international factors. Topline Securities Ltd echoed this assessment, noting the absence of any significant positive triggers to drive market activity.
Investor Flows and Sector Performance
Trading activity revealed a mixed picture of investor behavior. Mutual funds emerged as net buyers, acquiring equities worth $22.7 million, while local companies added $5 million to their holdings. However, these gains were offset by net selling from individual investors, banks, and foreign corporates, who collectively offloaded shares valued at $31.9 million.
Sector-wise performance was varied. Cement stocks outperformed, benefiting from January offtake reaching a five-year high of 4.54 million tonnes – a 13% year-on-year increase. Power generation, jute, and real estate also posted weekly gains, ranging from 2.3% to 7.1%. Conversely, the chemicals, engineering, tobacco, and oil and gas exploration and production sectors faced downward pressure, closing the week in negative territory.
Macroeconomic Signals: A Mixed Bag
The week also brought a mixed bag of macroeconomic data. The Consumer Price Index (CPI) for January rose to 5.80% year-on-year, up from 5.61% in December , indicating a slight increase in inflationary pressures. However, the trade deficit showed improvement, declining by 7% year-on-year to $2.73 billion and a more substantial 29% compared to December . Exports experienced a robust rebound, surging 35% month-on-month to a record $3.06 billion.
Petroleum offtake also demonstrated healthy growth, increasing 12% month-on-month to 1.52 million tonnes in January. Analysts attributed this rise to lower petrol and high-speed diesel prices, a recovery in automobile sales, and support from the government’s Green Tractor Scheme. Fertilizer sales, however, remained weak, reflecting reduced demand following the Rabi season.
The Pakistani rupee remained relatively stable, appreciating marginally by 0.02% week-on-week to close at Rs279.71 against the US dollar. The State Bank of Pakistan’s foreign exchange reserves increased by $56 million, reaching $16.15 billion.
Looking Ahead: MSCI Review and Earnings Season
Despite the prevailing challenges, market participants remain cautiously optimistic. AHL indicated that investor sentiment in the coming weeks will be heavily influenced by the upcoming MSCI review and the ongoing corporate earnings season. The KSE-100 index is currently trading at a price-to-earnings multiple of 9.3 times, with a dividend yield of around 5.3%.
AKD Securities Ltd anticipates that the market will maintain positive momentum, supported by improving macroeconomic indicators and relative political stability. Analysts believe that the government’s continued focus on structural reforms, coupled with expectations of foreign investment, could further bolster investor confidence. Some projections estimate the KSE-100 index could reach 263,800 points by December, contingent on a favorable political and economic environment.
Government Finances and External Support
On the fiscal front, the Federal Board of Revenue reported a 16% year-on-year increase in tax collection for January, with receipts totaling Rs1,015 billion. Externally, the United Arab Emirates extended a $2 billion loan to Pakistan for one month, and the government has requested a two-year extension of its oil facility from Saudi Arabia.
While security concerns remain elevated, investors are hopeful that stabilizing domestic indicators, particularly moderating inflation and rising exports, will lay the groundwork for improved market performance in the months ahead. The market’s ability to sustain a recovery will depend heavily on the resolution of security issues and the successful implementation of economic reforms.
