Foreign Buyers Are Coming Back to PSX

The upward revision in policy rates, some business-friendly recommendations in mini-budgets, and inflows of foreign exchange have bounced back the bullish trend at Pakistan Stock Exchange (PSX), with foreign traders making their comeback on quite a positive note.

Foreign investors continued to remain the major net buyers for the second consecutive week, mopping shares worth $12.3 million. The KSE-100 Index gained 848 points (2.1%) during the week as the market activity also remained elevated during the week with the average daily traded volumes inching up by 3.8% WoW to 175 million shares.

The index was mainly driven by banks, oil marketing companies, Automobile Assemblers, and Oil Exploration & Production Companies (E&Ps) contributing gains of 234 points (28%), 129 points (15%), 83 points (10%) and 74 points (9%) respectively in the benchmark index.

Banks remained in the limelight, returning 2.2% during the week owing to foreign buying, a surprise increase in Policy Rate by 25 base points to 10.25% and SBP’s tacit signal of further monetary tightening in the future. This will bode well for the banking scrips projecting growth in interest income.

Automobile assemblers returned 6.4% during the week on supplementary budget’s recommendation of lifting a ban on non-filers to purchase up to 1,300cc cars and policy to tighten loopholes for importing cars. Pak Suzuki Motors (PSMC) being the chief beneficiary of the ban rallied 27.6% during the week.

OMCs and refineries returned during the week due to a complete ban imposed on imports of furnace oil.

The reserves of the central bank jumped by $1.5 billion (23%) to $7.0 billion, led by $2 billion inflows from Saudi Arabia and UAE where external debt and official payments caused less than an equal increase in reserves. This created a favorable situation for the stock exchange.

The Index has cumulatively returned 10.9% during 2019 backed by strong buying interest mainly from foreigners. With US FED holding off interest rates and growing doubts of further rate hikes, foreign selling may remain muted going forward as well.

Nonetheless, concerns continue to persist regarding IMF program which may not come through soon owing to immediate funding (availed from UAE and Saudi Arabia) and ongoing deliberations over the future course of policy actions.