Pakistan Stock Exchange benchmark index witnesses 2.5%WoW decline

Pakistan Stock Exchange (PSX) remained under pressure during the week ended on September 23, 2022, driven by renewed weakness in the PKR against the USD and concerns regarding the country’s fiscal health.

Participation in the market remained lackluster, with average daily traded volumes averaging 166.1 million shares during the week under review as compared to 183.2 million shares a week ago.

The benchmark index, KSE-100 Index lost 1,059.28 points during the week, depicting a 2.5%WoW decline. The PKR continued to lose value against the US$, depreciating 1.2% during the week.

Furthermore, the SBP conducted the T-Bill auction this week, where the central bank raised PKR1.3 trillion against a target of PKR1.5 trillion. The cut-off yields for the 3-month and 12-month tenors remained largely flat, whereas the yield for 6-month increased by 15bps to 16%.

Other major news inflows during the week were: Saudi Fund for Development confirmed a one-year extension of US$3 billion deposit, 2) Initial estimates pointed towards flood losses to be US$30 billion, 3) IMF announced that it would support Pakistan’s flood relief, reconstruction efforts under the current program, 4) Russia agreed to provide petrol to Pakistan on deferred payments, 5) In July 2022, LSMI output was down by 16.5%MoM, 6) SPI was down by 8.11%WoW, and 7) CAD dropped 42%MoM to US$703 million in August 2022.

The top performing sectors were: Tobacco, and Synthetic & Rayon, while the least favorite were: Close-End Mutual Fund and Oil & Gas Exploration Companies.

Top performing stocks were: PAKT, IBFL, UNITY, TRG and NESTLE, while laggards were: TGL, HGFA, CEPB, KEL and PPL.

Foreign investors emerged the major buyers with net buy of US$5.1 million, followed by Individuals (US$1.5 million). As against this, Insurance Companies were the biggest sellers with US$3.3 million, followed by Mutual Funds (US$2.4 million).

Going forward, the easing off in international commodity prices, particularly oil is expected to be a welcomed development as the pressures on the external account start to recede.

On the flip side, the strength in the US$ following the 75bps policy rate increase in the US is expected to put pressure on the exchange rate, which could murk sentiment.

Investors will be looking towards any policy action in the upcoming Monetary Policy, scheduled for October 10, 2022.

However, the economic slowdown—an intended outcome of the SBP’s contractionary policies—and effects of floods across the country could adversely affect sentiment going forward. Investors are to stay cautious, while building new positions in the market.