In continuation to the last week’s theme, the ultimate decision of the Supreme Court, the release of funds to the Election Commission and table talk amongst the top political leadership remained the center of attention. A visible break in the political deadlock after the ruling coalition and PTI showed a willingness to engage in talks resulted in some excitement from the participants and the market embarking on a mildly bullish run. Amid this turmoil, a heated political scenario and a constitutional crisis were bound to yield negative results for the country. However, a glimmer of hope remains in the possibility of a consensus amongst the ruling elites to settle their political differences to steer the country out of this crisis and settle in on a date for nationwide polls.

We expect the discussions to follow smoothly, with a consensus to be reached by the week’s close. With a clearer path to walk towards, the market saw some investor confidence return to the local bourse as the KSE 100 recorded an intra-week high of 41,791pts before settling at 41,581pts, recording a gain of 1.4% (↑573pts WoW). Key performers during the week included POML(↑22.9%), SRVI (↑14.1%) and DAWH (↑13.1%). Average volumes also climbed to 100.6Mn shares (↑113.0% WoW) while traded value rose to USD 20.2Mn (↑82.8% WoW). PKR remained largely stable over the week, settling at 283.8 (↓0.3% WoW).

Politics; left, right and center: We saw the first round of meetings between the ruling coalition and the PTI conclude positively, with an imminent end to the political strife led by the Supreme Court’s announcement on provincial election dates. The recent developments come as a positive surprise given the market has remained directionless amid a political and economic crisis over the last few months along with constant delays in the resumption of the IMF bailout. The top court remains in the spotlight however, since the parliament is focused on exerting its’ legislative dominance under the Constitution and remains wary of any attempts to override such right. To reaffirm their stance, PM Shehbaz Sharif undertook a successful VoNC thereby asserting his stay in office and sending out a clear signal that the Parliament is by no means in a mood to succumb to any external pressures.

Outlook: Market performance, in the near term, shall remain dependent on the outcome of the political dialogue between the PDM and PTI, revival of the IMF program and materialization of the KSA and UAE bilateral support, in our view. Positive outcomes on the same could lead to a sharp rally in the index along with increased investor confidence and participation.

Courtesy – BMA Research