Pakistan Stock Exchange remains in the grip of volatility and uncertainty

Pakistan Stock Exchange (PSX) witnessed volatility during the week ended on April 07, 2023 owing to economic uncertainty, further exacerbated by political tension that persisted within the country. However, the market showed some resistance, and moved into positive territory come Wednesday when the State Bank of Pakistan (SBP) hiked rates by lesser than expectations, by 100bps to 21%, contrary to market expectations of a 200bps increase.

News flows of a Saudi Arabia assurance of US$2 billion primarily helped boost investors’ confidence. However, the news of the cancellation of a Finance Minister’s earlier planned visit to the US for IMF and World Bank spring meetings, once again shattered investor confidence, resulting in the market closing in the red on the last trading session. The market closed almost flat.

Moreover, participation in the market improved, increasing by 19.4%WoW as the average daily traded volume was reported at 110.2 million shares, as against 92.3 million shares a week ago.

Other major news flows during the week included: 1) Country’s foreign exchange reserves eroded by US$56 million, 2) March inflation rose to 35.4%, highest since 1965, Pakistan fought war with India, 3) China rolled over US$2 billion loan, 4) trade deficit during first nine months of current financial year shrank to US$22.9 billion YoY, 5) GoP raised PKR2.24 trillion via T-Bills auction, 6) FBR suffered massive shortfall of PKR304 billion during July-March period.

Sector-wise, Modarabas, Woollen, and Miscellaneous emerged the top performers. As against this, Tobacco, Leather & Tanneries, and Close-end Mutual Funds were amongst the worst performers.

Flow wise, selling was led by Insurance companies with a net sell of US$4.8 million. Individuals absorbed most of the selling with a net buy of US$2.7 million.

Top performing scrips were: SML, PSEL, FATIMA, EPCL, and BNWM, while laggards included: PAKT, MUREB, AIRLINK, EFUG, and HCAR.

Market is expected to remain jittery until there is a clear picture on the IMF front, the news of the cancellation of Finance Minister’s visit has further added to the uncertainty in this matter. If political tension settles, the market's confidence may also be restored.

Until then, investors are advised to take a cautious approach while building new positions. Analysts continue to advocate the stocks with dollar-denominated revenue streams, i.e. Technology and E&P sector, to hedge against the currency risks.