Pakistan Stock Exchange witnesses 39.8%WoW decline in average daily trading volume

The week ended on February 03, 2023 remained volatile  due to the ongoing talks with IMF to ensure its prerequisite conditions are implemented which includes high circular debt which is hovering around PKR2.5 trillion for power sector and PKR1.6 trillion for Gas sector while restricting subsidies only to vulnerable domestic consumers. Furthermore the lender has also demanded political consensus given that opposition might create hurdles in the way of implementing tough economic decisions.

The local currency has dropped significantly after it was left to market forces, depreciating to PKR276/USD.

Participation in the market declined, with daily volumes averaging at 130.78 million shares during the week, as compared to 217.20 million shares in the prior week depicting a loss of 39.8%WoW.

Other major news flows during the week included: 1) US Fed raising rates a quarter point, 2) SBP reserves plunging to US$3.07 billion, 3) trade deficit for first seven months of FY23 shrinking 31.97% to US$19.632YoY, 4) IMF identifying PKR2 trillion hole in budget estimates, 5) CPI Inflation for January 2023 rising to 27.6% and 6) LPG prices hitting historic high of PKR300/kg.

The top performing sectors were; i) Glass and Ceramics (+4.4%WoW), ii) Pharmaceuticals (+3.9%WoW), and iii) Woolen (+3.6%WoW), while the least favorite sectors were: Miscellaneous, Textile Weaving, and Tobacco.

Stock-wise, top performers were: GATM, ABOT, GHGL, COLG, and KTML, while laggards were: PSEL, GADT, SRVI, PPL, and PSMC.

Flow wise, individuals were the major buyers with net buy of US$0.32 million, followed by Banks/DFI with net buy of US$0.13 million), while foreign investors were major sellers, with a net sell of US$0.75 million.

The market is expected to remain under pressure in the near future mainly due to the concerns stemming on political and economic fronts, expected to keep the market movements in check. 

Any news flow regarding foreign inflows, whether from the IMF or other bilateral and multilateral sources, would support the market trajectory. However, the government would have to take difficult decisions to get the IMF on board, which includes additional revenue collection of PKR600 billion and hikes in gas and electricity tariffs.

 Analysts continue to advise a cautious approach while building positions in the market.