The anticipation of heightened inflation had a negative impact on the market, fearing an ad-hoc policy rate hike. However, the recent T-bill auction negated that sentiment, with yields largely maintaining their flat trend as compared to the previous auction.
Now the focus is on September 2023 CPI data and the Monetary Policy Committee meeting scheduled for September 14, 2023.
Nonetheless, owing to a week full of result announcements, market participation witnessed daily trading volume averaging at 206 million shares, as compared to the previous month average of 167 million shares.
The current account shifted from a four-month streak of surplus to a deficit of US$809 million, mainly due to an increase in imports (up 33%MoM) and worker remittances (down 15%MoM) during the month.
Foreign exchange reserves held by the SBP eroded by US$125 million to US$7.9 billion as of August 18, 2023. Additionally, due to import pressures and dividend repatriations, PKR depreciated by 1.74%WoW, to close at PKR301 against the greenback.
Furthermore, throughout the trading week, the gap between the interbank and open market exchange rates remained 4% to 5%. According to the IMF agreement, this gap should not be ±1.25% for 5 consecutive days.
Other major news flows affecting market during the week included: GoP borrowed US$2.89 billion borrowed from multiple financing sources during the first month of the current financial year, 2) Revised GDP growth under PDM government may turn out to be over negative one percent, 3) Power tariff hike, 4) Banking sector spread decreases by 64bps MoM in July, 5) Power generation was up 5% and cost of generation was down 22 percent, 6) RDA inflows touched US$6.487 billion, but faced headwinds from global rates, 7) Election Commission said election not possible before May 2024.
Synthetic & Rayon, Textile Weaving, and REIT were amongst the top performing sectors, while Cable & Electrical Goods, Pharmaceuticals, and Inv. banks/ Inv. cos./ Securities cos. were amongst the worst performers.
Net selling was recorded by Individuals with a net sell of US$8.2 million. Insurance absorbed the selling with a net buy of US$19.0 million.
Top performing scrips during the week were: SCBPL, HMB, IBFL, BAFL, and MARI, while top laggards included: AGP, PSX, GADT, PAEL, and FABL.
Market is expected to sustain a positive outlook, driven by a series of favorable developments with talks being commenced between the IMF and the caretaker government and the confidence of bilateral partners.
Given the ongoing trend of significant currency devaluation, analysts recommend investors to consider investing in companies with revenue in US$ (Tech and E&Ps). Another viable approach is to focus on companies that offer healthy dividend yields or companies with strong valuations.
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