Pakistan Stock Exchange benchmark index declines 4%WoW

The political turmoil in the country, along with the continuation of the currency crisis, has led to weakness in the market during the week ended on December 23, 2022. The KSE-100 index settled at 39,669 points, down 1,632 points or 4%WoW. 

The index slipped below 40,000 level since late July 2022. The weakness in the index was accompanied by a meager improvement in participation over the past week, with average daily trading volume at 180.2 million shares during the week, as compared to 161.9 million shares in the earlier week.

Other major news flow during the week included: 1) July-November current account (CAD) shrank 57%YoY, 2) GoP likely to slap flood levy on non-essential imported items, 3) definitive agreement regarding Reko Diq project finalized, 4) Pakistan’s REER index declined to 98.8 in November, 5) gas sector 10-member body formed on circular debt settlement, 6) SBP lowers FY23 growth forecast, 7) international donors to extend over US$16 billion for rehabilitation of flood victims, 8) S&P lowered Pakistan’s sovereign rating, and 9) Super tax to become applicable in TY23 and onwards. Furthermore, the foreign exchange reserves held with the SBP fell to US$6.1 billion.

On the currency front, the PKR remained largely flat against the US$.

Top performing sectors were: Textile Weaving, Tobacco, and Insurance, while the least favorite sectors were: Leasing Companies, Refineries, and Cable & Electrical Goods.

Stock-wise, top performers included: LOTCHEM, AICL, PSEL, PPL, and PAKT, while laggards were: PGLC, PAEL, TRG, ANL, and PIOC.

Flow wise, Banks/DFIs were the major buyers with net buy of US$7.9 million, followed by Companies with net buy of US$5.0 million. As against this, Brokers and Individuals were major sellers during the week, with a net sell of US$3.8 million and US$3.8 million, respectively. Foreign Investors were sellers of US$3.3 million during the period.

With the political uncertainty and currency crisis still ongoing and no definitive action from the IMF on the horizon, the market is expected to witness pressure in the near future.

Sentiments further worsened by the advent of security tensions in the Northern part of the country. In this backdrop, the need of the hour is to arrest the country’s dwindling reserves, which would be dependent on flows from multi-lateral and bi-lateral sources.

Any news regarding foreign inflows would be well received by the market.

Furthermore, with inflation readings persisting at elevated levels in the foreseeable future, further tightening by the SBP is still on the cards, fear of which would likely to keep sentiment in the equity markets muted. Consequently, analysts advise clients to stay cautious while building new positions in the market.