PakStox Outlook

Today, once again, 'foreign corporates' were the major net sellers at PSX, with a net sale of $15.9 million, which was absorbed by mutual funds. Since last Friday, the 'foreign corporates' have made a total net sale of nearly $28 million worth of shares at PSX, while local mutual funds have made a net purchase of $17.4 million. The KSE100 Index has risen to a record high, surpassing the 82k mark. Imagine how much higher the Index would have climbed if the 'foreign corporates' had not been selling, particularly as investors in local mutual funds began shifting from the money market to the equity market following a drop in the policy rate from the record high of 22%.

Today's net buying of $6.9 million by local mutual funds at the PSX is likely the largest single-day net purchase I've seen in a long time. This suggests a shift from money market funds to equity funds, which is a bullish signal, especially given that 'foreign corporates' were once again net sellers at the PSX today, offloading a substantial amount of over $4 million, while the KSE100 Index surged nearly 1,000 points. Also see this.

WTI crude oil futures dipped 0.4% to close at $70.9 per barrel, snapping a two-day winning streak despite the Federal Reserve's first interest rate cut since 2020. While the Fed's larger-than-expected 50 basis point rate cut initially bolstered prices, overall market reactions remained muted. Persistent concerns about demand, particularly from China, linger following weak economic data that heightened fears of a sluggish recovery. Additionally, traders are closely monitoring escalating geopolitical tensions in the Middle East and the risk of potential supply disruptions. Meanwhile, EIA data showed a sharper-than-expected drop in US crude inventories, down by 1.63 million barrels to 417.5 million, well above the projected 500,000-barrel draw.

The Federal Reserve slashed the target range for the federal funds rate by a substantial 50 basis points to 4.75%-5%. Officials anticipate a total of 100 basis points in rate cuts by the end of the year, implying two more 25 basis point reductions. For 2025, an additional percentage point in cuts is projected, with a final 50 basis point cut expected in 2026. The Fed statement said..."Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee's 2 percent objective but remains somewhat elevated." https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm

Foreign corporates were net sellers of a significant $4.3 million today at the Pakistan Stock Exchange. So far in September, foreign corporates have made net sales totaling over $16.6 million. Over the last 30 trading sessions, they have been net sellers of $10.8 million. Despite this, foreign corporates remain net buyers of $84.7 million year to date. Local mutual funds have become net buyers over the last thirty trading sessions, though remaining net sellers at the PSX on a year-to-date basis of almost $13 million in net sales. Insurance companies remain the only major local investors at the PSX that are net buyers on a year-to-date basis, with net purchases totaling $58 million. However, since the last week of August, they have turned into net sellers, and over the last thirty trading sessions, they have accumulated net sales of nearly $9 million. See Charts

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) reduced the policy rate by 200 basis points to 17.5%, citing a faster-than-expected decline in both headline and core inflation due to delayed energy price hikes and favorable global oil and food prices. This marks the third consecutive rate cut after maintaining a steep policy rate of 22% for a year. Key developments include falling global oil prices, stable foreign exchange reserves of $9.5 billion, improved inflation expectations, and declining government security yields. However, the agricultural sector faces challenges, particularly in cotton production. The MPC expects real GDP growth for FY25 to remain between 2.5% and 3.5%. Workers' remittances and export earnings have improved, while the current account deficit is contained within 0-1% of GDP. Fiscal consolidation has improved Pakistan's debt-to-GDP ratio, falling to 67.2%. However, to meet fiscal targets, tax collection must increase significantly...

Maple Leaf Cement Factory Limited (PSX: MLCF) - Annual Financial Results as of June 30, 2024 For the year ending June 2024, MLCF earned a net income of Rs. 5 per share. No dividend was declared. Revenue registered a 7% increase. Gross profit increased by 28%. Profit before tax decreased by 3%. Profit after tax increased by 17%. Financial charges saw a significant rise, increasing by 50%. The tax rate for the year remained at 41%, compared to 51% last year. In the last quarter (Q4 Jun 2024), MLCF earned a net income of Rs. 0.9 per share. The profit after tax in the last quarter increased by 5% over the average of the last four quarters. MLCF is currently trading at a price-to-earnings ratio of 6.8. The company has a 0.66% exposure in the KSE100 Index, 0.94% in the KSE30 Index, and 1.35% in the KMI30 Index. MLCF holds 7.5% stake in Next Capital and 7.5% stake in Pioneer Cement (PSX:PIOC), classifying these as short-term investments. Kohinoor Textile Mills (PSX:KTML) is the holding compan...