Positivity loomed over the successful last review of IMF’s SBA, the new incumbent government's steps and commitment towards reforms. A new tax regime ordered for retailers and wholesalers, piloting initially in major cities, aimed to broaden the tax base. While similar taxation measures have failed previously, if successful this time, these could set the stepping stone for tax base broadening.
With FTSE Russell retaining Pakistan in the secondary emerging market for the next six months, further optimism prevailed.
Inflation outlook also presented a positive stance, with March 2024 CPI expected at 20.6%YoY, turning current real interest rates into positive territory after 38 months.
GDP growth for 2QFY24 was reported at 1.0%YoY, supported by a 5% annual growth in the agriculture sector, but dragged down by a 0.8%YoY contraction in industrial activity.
On the political front, reconstituting economic councils/committees, with the exclusion of the finance minister from heading CCI and previously from ECC (which eventually reverted), is causing confusion among the investors and likely to cause some delays in initiating reforms.
Smuggling of petroleum products from Iran is on the rise again as indicated by OCAC and PALSP, which is likely to hit adversely local refineries.
Overall, market participation improved with daily traded volume averaging at 330.7 million shares as compared to 323.5 million shares a week ago, up 2.2%WoW.
Other major news flows during the week included: 1) Tax collection gap rose to whopping PKR 5.8 trillion, 2) Government borrowed PKR181.3 billion debt in a week; 3) M2 was up by PKR149.4 billion in a week, 4) foreign investors’ profit repatriation during 8 month of the current financial year rose 237%YoY to US$759.2 million and 5) Weekly SPI was almost flat.
Transport, Woollen and Tobacco were amongst the top performing sectors, while Jute, Leasing co., and Textile weaving were amongst the worst performers.
Major selling was recorded by Companies with a net sell of US$7.6 million. Insurance absorbed most of the selling with a net buy of US$9.0 million.
Top performing scrips of the week were: PTC, KTML, SCBPL, FFBL and THALL, while laggards included: SHEL, PGLC, PIBTL, ASL and FCEPL.
Emerging risks include additional taxation and increases in international prices. Policy rate story could again come into focus. Analysts expect the first rate cut in the final quarter of the current fiscal year.
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