Pakistan Stock Exchange benchmark index posts 1.9%WoW gain

Pakistan Stock Exchange witnessed bullish sentiments during the first three trading sessions. However, profit-taking by investors resulted in market closing in red during the last two sessions. Still the benchmark index managed to gain 861 points during the week ended on July 15, 2023 and close at 45,068 points, up 1.9%WoW.

Market participation remained healthy with daily traded volume averaging at 352 million shares as compared to an average of 265 million shares during the earlier week up 33%WoW.

The market performance was characterized by the IMF’s executive board’s approval of the SBA (Stand-By Arrangement) and the inflow of US$1.2 billion. Additional support was provided by influx of US$2.0 billion from Saudi Arabia and US$1.0 billion from United Arab Emirates. The inflows would reflect in the next week's reserve numbers held by State Bank of Pakistan (SBP) which are anticipated to cross US$8 billion mark after 9 months. As of July 07, SBP held reserves were reported at US$4.5 billion.  As a result PKR gained 0.11%WoW to close at PKR277.6/ US$ parity.

Other major news flows during the week included: 1) steps taken to broaden tax base, 2) July-May LSMI output declined 9.87%YoY, 3) FY23 remittances fall 13.6%YoY to US$27 billion, 4) car sales plunged 82% in June and 59% in the last financial year, 5) GoP announced to mobilize additional PKR3.2 trillion from power consumers and 6) during Jan-May period 4.88 million mobile phones manufactured in country.

Chemical, Automobile Parts & Accessories, and Leather & Tanneries emerged the top performers. Close-End Mutual Fund, Technology & Communication, and Textile Spinning were amongst the worst performers.

Flow-wise, major net selling was recorded by Mutual Funds with a net sell of US$5.97 million. Individual absorbed most of the selling with a net buy of US$3.93mn.

Top performing scrips were: during the week were: UNITY, HCAR, COLG, PSMC, and AIRLINK, while laggards included: GADT, UPFL, SHEL, PGLC, and TRG.

Stock market is expected to remain positive, owing to growing foreign exchange reserves and consequent improvements in the PKR/ US$ parity.

At present market offers attractive valuation. However, upcoming results may exert pressure on bullish sentiment due to the retrospective imposition of the super tax.

Investors are advised to follow a cautious approach in the selection of scrips and focus on stocks with dollar-denominated revenue streams (Tech and E&Ps) and companies with healthy dividend-yields.