Pakistan Stock Exchange witnesses lackluster movement

The week ended on December 16, 2022 witnessed a range-bound movement of the benchmark index. The highlight of the week was Thursday when the market took a hit and the index posted 1.0%WoW decline to close at 41,301 points.

Economic uncertainty caused by enhanced delays in the 9th Review of the IMF program, along with rising interest rate led to a lackluster sentiment in the market. Further exasperating the sentiment is the critical level of the country’s foreign exchange reserves, having dropped to USD12.6 billion. Average daily trading volume decreased further by 9.9%WoW, down to 180 million shares.

Major news flows during the week were: 1) five financing pacts worth US$775 million inked with ADB, 2) IMF wants to observe 3 more quarters, examine flood rehab plan, 3) Saudi Arabia may increase the amount of oil supply to Pakistan on deferred payments to US$2.4 billion a year, 4) Reko Riq project got green signal with definitive agreement signed, 5) Jul-Nov workers’ remittances decline 9.8%YoY, 6) Fed raised rates by half percentage point, sees economy nearing stall, and lastly 7) Jul-Oct LSM sector output down 2.89%YoY.

The top performing sectors were: Miscellaneous, Tobacco, REIT, Textile Composite, and Vanaspati & Allied, while the least favorite sectors were: Leasing companies, Automobile Parts, Close-end Mutual Funds, Refineries, and Jute.

Stock-wise, top performers were: PSEL, PAKT, SYS, ENGRO, and DCR, while laggards included: PGCL, LOTCHEM, TGL, THALL, and MTL.

Flow-wise, Foreigners topped the net sellers, offloading US$9.6 million followed by Mutual funds (US$7.1 million), Individuals (US$2.5 million), Insurance Companies (US$1.4 million) and NBFC (US$0.1 million). While Banks, Companies, Other organizations and Brokers were on the buying side, with a net buy of US$12.8 million, US$6.2 million, US$1.5 million, and US$0.2 million respectively.

With the rising policy rate amid political uncertainty, the market remains in a state of indecisiveness. Incoming news regarding delays in IMF was bound to invoke some gloom; the longer is the delay the more the uncertainty is going to influence the market, keeping volumes away.

The local currency has started paring some of the gains it had made recently, depreciating to PKR225/USD as the foreign exchange slips to critical levels despite restrictions on the opening of L/Cs.

With the winters approaching, inflation is expected to remain persistent. The market participants expect another cumulative rate hike of 200 bps in FY23.