Pakistan Stock Exchange posts 2.6%WoW decline

During the week ended on June 24, 2022, news flow was dominated by the accord between the Government of Pakistan (GoP) and the International Monetary Fund (IMF). 

On Friday, the Prime Minister announced that a 10% super tax will be imposed on large sectors in FY23, causing the Pakistan Stock Exchange benchmark index to lose 1,665 points in one day, closing the market at 41,052 points or 2.6%WoW decline.

Earlier on Tuesday, it was announced that an agreement had been reached, in which the GoP revised the FBR collection target for FY23 to PKR7.4 trillion from PKR7.0 trillion.

Average volume for the Index surged to 300.5 million shares, up 72.6%WoW mainly due to Friday’s grand sell-off.

Other major news flows during the week were: 1) loan agreement signed with consortium of Chinese banks for US$2.3 billion, 2) FDI shrank 29%YoY in May, 3) cost of power generation surges by 131% YoY due to high fuel costs, 4) May banking spread plunges 42bpsMoM, 5) GoP mulled pledging five federal assets to issue Sukuk, and 6) ECC approved PKR149 billion in payments to IPPs and KE.

The top performing sectors were: Vanaspati & Allied industries, Power, Tobacco, Insurance, and Refinery, while the least favorite sectors were: Automobiles, Textile, Cement, Close-end mutual fund, and Banking.

Stock-wise, top performers were: POML, EFUG, KEL, SML, and PAKT, while laggards were: CHCC, KTML, GATM, MLCF, and JVDC.

Flow-wise, Insurance companies remained as the net sellers, offloading US$8.4 million followed by Foreigners (US$2.4 million), Mutual funds (US$1.1 million), NBFCs (US$0.7 million), and Companies (US$0.1 million), while Individuals (US$7.0 million), Banks (US$2.1 million), Brokers (US$0.2 million), and Other organizations (US$3.4 million) were on the buying side.

The super tax imposed on large sectors has come as a major shock to all players in the market. With profitability of these sectors decreasing by 10%, the market sentiment is surely negative as players look to liquidate their positions. Add inflationary pressure and rising interest rates to the mix, and this creates a strong bearish environment for the market. With that being said, the agreement with IMF is crucial for the country, with further financing now expected to be available from World Bank, China, and Saudi Arabia which will alleviate the downward pressure on the currency along with supporting the depleted foreign exchange reserves, hence having the potential to trigger a bull-run in the short term.