Pakistan Stock Exchange benchmark index up 3.14%WoW

Week ended on February 10, 2023 started on a positive note as talks with IMF continued with the delegation that has been in Pakistan since January 31, 2023. Investors remained hopeful regarding outcome of the meetings with the IMF team. Market witnessed bullish sentiments during the first four days of the week with the benchmark index gaining 1,995 points. Come Friday, market nosedived over the inconclusive talks with the IMF team, plunging the market by 725 points on the last trading session of the week. Despite all odds, benchmark index was up 1,271 points to close at 41,742, depicting a 3.14%WoW increase.

Reportedly, Pakistan received MEFP on Thursday at the conclusion of the IMF talks in Islamabad; after the GoP committed to impose additional taxation of PKR170 billion and cut in untargeted subsidies.

Participation in the market witnessed significant improvement with average daily trading volume rising above 284 million shares, from 130.78 million shares in the earlier week, up 117.2%WoW.

Alarmingly foreign exchange reserves by State Bank of Pakistan (SBP) plunged to meager US$2.9 billion, import cover of less than 3 weeks. As a result exchange parity came under pressure to close at PKR268.28/US$ on Friday, recording a fall of 2.6%WoW.

Other major news flows during the week included: 1) Prime Minister approved imposition of additional PKR180 billion taxes, hike in electricity and gas tariffs and on top of all GST rate, 2) delay in opening L/Cs for POL products is likely to lead to petrol crisis in another two weeks, 3) fiscal deficit swelled to 2% of GDP, 4) GoP also hinted at withdrawal of power subsidy for exporters, and 5) GoP sucked in PKR464 billion liquidity from the market via MTBs’ sale.

Textile Weaving, Oil & Gas Exploration Companies and Pharmaceuticals sectors were amongst the top performers. Leasing Companies, Synthetic & Rayon and Property were amongst the worst performers.

Major net selling was recorded by Insurance Companies (US$6.5 million). Individuals absorbed most of the selling with a net buy of US$5.9 million.

Top performing scrips during the week were: OGDC, TGL, MUGHAL, ABOT, and SCBPL, while laggards included: PGLC, EFUG, IBFL, HUBC, and JVDC.

All eyes are on the IMF staff-level agreement, with the positive news from IMF subsequently unlocking foreign inflows.

Improvement in the reserves will be a big relief as restrictions on opening L/Cs are expected to ease off. Even though there may be respite in the short term on the back of IMF’s EFF rollback. Investors are advised to remain cautious as the inflation levels may skyrocket to 30% in the coming months.