Pakistan: Sale of petroleum products down 21%YoY

Sales of petroleum products were reported at 1.22 million tons for February 2023, a fall by 16%MoM and 21%YoY. This marks the biggest monthly decline after July 2022, when it went down 26%MoM. The fall can be attributed to significant price hikes in MS and HSD during the last 45 days.

In addition, there were severe fuel shortages at petrol stations in Central Punjab, as talks of price hikes remained rampant throughout the month. This led to dealers choosing to stockpile fuel instead of continuing with normal operations.

The situation was further exacerbated by OMCs which struggled to obtain timely shipments of petroleum products, due to the sharp decline of the PKR during the period. This resulted in delayed L/C clearances and significant exchange losses for the importing entities, ultimately leading them to restrict their supplies to dealers throughout the country.

Finally, lesser working days also contributed to the monthly decline of POL sales during February 2023.

On an 8MFY23 basis, total POL sales remained down by 19%YoY, stuck at 11.69 million tons as against 14.45 million tons for the same period last year.

The decline is largely due to a drop in organic demand, as petroleum sales tend to be closely tied to the overall health of the economy. This is evidenced by a 3.7% decline in LSM activity during 1HFY23, a 7.3%YoY drop in power generation during the 7MFY23, and a 42%YoY decrease in auto sales during the same period.

The ongoing wave of inflationary pressures has also gripped the economy, resulting in consumers choosing to avoid leisurely travel amidst reduced purchasing power.

It is worth mentioning that the prices of both MS and HSD have risen by PKR117 and PKR136 per liter to PKR267 and PKR280 per liter respectively. These prices represent an increase of 78%/94% as against March 2022, in line with the current government's plan to pass on the full cost of supply and levies to consumers.

HASCOL emerged the most resilient amidst the broad based industrial decline as total volumes for the month was reported at 27,000 tons, up by 4%MoM and 5%YoY. This came on the back of HASCOL’s approach to remobilize most of its retail depots by CY22 end, as most closed up due to its dealer network fallout back in CY20. On the retail front (MS, HSD, HOBC), PSO and APL ended the 8MFY23 period with market shares standing at 49.2%/8.5%. Finally, share of smaller players (bottom 25) stood at 6.3% as against 6.6% last month.

With two-thirds of the year behind us – the demand for petroleum products hasn't looked this bad in years since the Covid’19 pandemic struck. Overall, the broad based economic slowdown continues to haunt the sustainability of the sector as risen prices and dampened industrial/commercial activity have kept offtakes under pressure.

Rampant inflationary pressures in the coming quarters alongside a depressed GDP outlook for the remaining months compels the analysts to assume negative volumetric growth for the industry.

 

Pakistan stock Exchange remains under pressure

Pakistan Stock Exchange (PSX) benchmark index witnessed an overall volatile week ended on January 07, 2023. Depletion of foreign exchange reserves continued, fueling uncertainty. Reserves have fallen by approximately US$2 billion since December 2022 began, pulling import cover down to alarming low level.

Although, some respite was seen towards energy stocks such as PPL, OGDC and refineries with news amidst gas circular debt resolution and fresh investment in a coastal refinery from Saudi Arab (aided by the much anticipated refinery policy).

Overall, average daily trading volume remained low at 176 million shares, as compared to 214.2 million shares traded in the earlier week. The Index gained 588 points during the week, depicting a 1.45% increase.

The PKR also lost some footing against the US$ and depreciated 0.31% to end at PKR227.14/US$ parity on Friday. CPI was still at multi-year highs, at 24.5% for December 2022, lower than expectations as compared to 26.6% in October 2022.

Finally, Trade deficit for November 2022 was reported at US$2.79 billion, down 28.4%YoY. Foreign exchange reserves held by State Bank of Pakistan (SBP) were reported at US$5.6 billion as at December 30, 2022.

On the international front, crude oil remained volatile, averaging at US$82/bbl as the global commodity remained in a limbo on the back of on/off Chinese lockdowns and the emergence of the newer COVID Omricon variant.

Other major news flows during the week were: 1) Pakistan will have to repay by January 10, 2023, US$1.3 billion in foreign loans, 2) annual inflation measured by the Consumer Price Index (CPI) was recorded at 24.5% in December last year, 3) The federal cabinet, on Tuesday, approved the Energy Conservation Plan, barring fresh restrictions on wedding halls and markets, 4) Pakistan is eying generating around US$8 billion from the international community and donor agencies for the rehabilitation and reconstruction of the flood-affected people, 5) Finance Minister Ishaq Dar on Wednesday claimed that friendly countries have announced their support.

Sector-wise, amongst mainboard items, Miscellaneous, Refinery and Transport were the top performers. Vanaspati and allied industries, Leather & Tanneries and Cable & Electrical were amongst the worst performers.

Flow wise, net selling was recorded by Mutual Funds with net sell of US$2.9 million). Companies absorbed most of the selling with a net buy of US$3.2 million.

Company-wise, top performers during the week were: PSEL, SHIFA, ATRL, PPL, and SNGP, while top laggards were: PSMC, HCAR, KEL, GADT, and GATM.

The market is expected to remain under pressure in the near future, driven by the weakness in the PKR against the US$ and the concerns regarding the country’s fiscal health.

Pakistan will have to repay around US$8.3 billion in shape of external debt servicing over next three months of current fiscal year.

Additionally, the political uncertainty and any developments regarding the 9th review by the IMF would remain in the limelight, which would unlock inflows from friendly countries.

Consequently, the market will remain jittery amid uncertainty over economic fronts. Analysts continue to advise a cautious approach while building positions in the market. 

Pakistan Stock Exchange benchmark index up 1.89%WoW

The benchmark index of Pakistan Stock Exchange (PSX) closed at 40,420 points, up 1.89%WoW on the last day of the week ended on December 30, 2022.

The gain can be largely attributable to renewed interest in the oil and gas sector as the Government of Pakistan (GoP) constituted a new committee for the resolution of circular debt.

Participation in the market improved, with daily traded volume averaging 214.27 million shares during the week, as compared to 180.2 million shares in the prior week depicting a gain of 18.9%WoW.

Pakistan is scheduled to make debt repayments of US$ one billion to two commercial banks early in January 2023. Foreign exchange reserves held by State Bank of Pakistan (SBP) further declined by US$294 million to paltry US$5.8 billion as of December 23, 2022.

Other major news flows during the week included: 1) SBP raised EFS and LTFF rates by 2% to 13%, 2) foreign exchange reserves held by SBP plunged to eight-year low, 3) makers raised steel prices by up to Rs25,000, 4) development spending dropped 38% in July-November period, 5) fertilizer offtake declined by 26.4%YoY during Rabi season, 6) power sector receivables crossed PKR2.5 trillion mark, 7) ADB said Pakistan needed US$62 billion to $155 billion for energy sector until 2030, and 8) FBR reduced duty on import of tractors to 15%.

Top performing sectors were: Food & Personal care products, Leasing Companies, and Leather and Tanneries, while the least favorite sectors were included Woolen, Textile Weaving, and Automobile Parts and Accessories.

Top performing scrips were: PSMC, HACR, NESTLE, PPL, and PGLC, while laggards included: THALL, YOUW, NCL, AICL, and ARPL.

Flow wise, Banks were the major buyers with net buy of US$23.93 million, followed by other organizations (US$3.91 million), while foreign investors were major sellers during the week, with a net sell of US$16.59 million.

The market is expected to remain under pressure in the near future, driven by the weakness in the PKR and the concerns regarding the country’s fiscal health. Pakistan will have to repay around US$8.3 billion in shape of external debt servicing over next three months of current fiscal year.

Additionally, the political uncertainty and any developments regarding the 9th review by the IMF would remain in the limelight, which would unlock inflows from friendly countries.

The market is likely to remain jittery amid uncertainties over economic fronts. Therefore, analysts to advise a cautious approach to investors while building positions in the market.

 

 

 

Pakistan Stock Exchange benchmark index closes almost flat

Economic uncertainty regarding Pakistan’s ability to make good on its debt payments kept the market under pressure during the week ended December 09, 2022. The benchmark index closed at 41,698 points, posting a decline of 1.07%WoW.

State Bank of Pakistan (SBP) confirmed the payment of US$1.08 billion of International Sukuk. This brought down foreign exchange reserves held by the SBP to US$6.7 billion on December 02, 2022.

Saudi Arabia provided a much-needed breathing space to Pakistan by announcing the rollover of US$3 billion which would help meet external sector challenges and achieve economic growth.

Participation in the market improved, though negligibly, with average traded volumes increasing to 179.7 million shares from 161.8 million shares in the earlier week.

Other major news flows during the week included: 1)  ECNEC okayed RKR333.6 billion for flood-hit projects, 2) GoP announced to borrow RKR5.52 trillion domestic debt over the next three months, 3) GoP debt rose to RKR50.152 trillion, 4) revised flood damages estimates estimated at US$46 billion, 5) tractor sales anticipated to decline 67 percent, 6) auto financing dropped for the fourth consecutive month, 7) Cement dispatches Declined by 17%YoY in November 20222 and 8) Cotton arrivals plunged 40%.

Top performing sectors were: Miscellaneous, Closed end mutual funds, and Vanaspati and Allied Industries, while the least favorite sectors were: Pharmaceuticals, Jute and Leasing.

Stock-wise, top performers were: PSEL, PGLC, MUREB, ILP, and BAHL, while laggards included: GLAXO, PIOC, CHCC, PSMC, and SEARL.

Individuals were major buyers with net buy of US$8.82 million, followed by Insurance companies with net buy of US$1.26 million. As against this, foreign investors were major sellers, with a net sell of US$6.26 million. Mutual funds continued to be a seller, with a net sell of US$3.71 million.

The market is expected to remain range-bound in the near future, clouded by liquidity concerns of the country, with foreign exchange reserves held by SBP plunging to US$6.7 billion— a less than one month import cover.

Some respite may come in the form of Saudi Arabia’s expected US$4.2 billion (US$3 billion in deposits and US$1.2 billion in deferred oil facilities), alleviating the pressures off the country’s FX reserves to some extent.

Political uncertainty and any developments regarding the 9th review by the IMF would remain in the limelight.

Pakistan Stock Exchange witnesses 25.8%WoW decline in average daily trading volume

Uncertainties regarding the country's liquidity position and ongoing political uncertainties kept the market range bound during the week ended on November 18, 2022, with the benchmark index settling down by 362 or 0.84%WoW at 42,730 points.

Participation in the market was substantially low this week, with daily traded volumes averaging 186.3 million shares during the week as compared to 251.1 million shares in the prior week, depicting a drop of 25.8%WoW. Moreover, the PKR lost footing against the US$ in the week, depreciated 0.68% over the period.

Other major news flows during the week were: 1) Talks between IMF and Pakistan rescheduled, 2) visit of Saudi Arabia's Crown Prince to Pakistan postponed, 3) Remittances recorded at USD2.2 billion for the month of October 2022, 4) World Bank agreed to provide US$1.3 billion to Pakistan for emergency, agriculture and housing relief, 5) GoP raised PKR757 billion from T-Bills auction, 6) LSM posted a 0.4%YoY decline in first quarter of current financial year, 7) July-October textiles and clothing exports down 1.34%YoY, and 8) Circular Debt Management Plan turned down by the Finance Ministry.

Top performing sectors were: Leasing, Chemicals, and Fertilizers, while the least favorite sectors were: Miscellaneous, Vanaspati & Allied Industries and Sugar & Allied Industries. Stock-wise, top performers were: LOTCHEM, FCEP, ENGRO, GHGL and TRG, while laggards included: UNITY, PSEL, KTML, GATM and ILP.       

The market is expected to remain range-bound in the near future, clouded by concerns regarding the liquidity position of the country (International Sukuk maturing on December 5, 2022) and the outcome of the IMF discussions. Furthermore, the capital markets would be taking further cues from the Monetary Policy announcement, scheduled for November 25, 2022.

Any news regarding foreign inflows will be well-received by the market, easing off sovereign liquidity concerns. Moreover, the economic slowdown in the country-an intended outcome
of the SBP's contractionary policies-and post-flood slowdown in economic activity is likely to keep corporate earnings subdued going forward. Investors are advised to stay cautious while building new positions in the market.

Pakistan: E&P companies post windfall profit

According to a report by Pakistan’s leading brokerage house, AKD Securities, the Exploration & Production (E&P) sector has reported phenomenal earnings for 1QFY23. The sector’s profit after tax was reported at PKR100.8 billion—the highest in its history. 

The sector’s earnings grew 55%YoY, with favorable macros driving earnings growth this quarter.  Net sales were reported at PKR226.6 billion for the quarter, higher by 13%QoQ and 54%YoY. This despite a drop in Oil/Gas production, but a weak PKR fueled topline growth. 

Exploration expenses in the final quarter of last year were at PKR26.6 billion, with the giant’s share dropping in PPL’s lap, with the Company reporting PKR11 billion in dry well costs. In 1QFY23, the exploration expenses of the sector were stated at PKR9.2 billion, lower by 65%QoQ, due to the absence of any substantial dry wells. 

On a company wise basis, the greatest sequential growth in profitability was posted by PPL, with net profit growing rising to PKR26.3 billion for the quarter. Trade Debts of OGDC and PPL were reported at PKR491 billion and PKR401 billion at the end of the quarter, respectively, increasing by PKR34 billion and PKR35 billion from the earlier quarter. 

The E&P sector provides investors with an exchange rate hedge, with the prospects of the sector having been muddied by mounting trade debts for the larger companies. Hence, within the sector, analysts like MARI and POL due to the relatively low exposure to the circular debt menace.

Pakistan Stock Exchange index up 2.95%WoW

As the political noise in the country eased off considerably, the benchmark index of Pakistan Stock Exchange (PSX) posted a robust uptick. The index moved up by 1,237 points during the week ended on November 11, 2022 to close at 43,093 points, up 2.95%WoW.

The uptick in index was witnessed amid healthy participation with the weekly average daily traded
volumes also jumping by 8.8%WoW to settle around 306.4 million shares, as opposed to 281.5 million shares witnessed last week. Stability also returned in the foreign exchange market during the week with PKR holding its ground against US$ at 221.6, appreciating by 20bpsWoW.

The newfound stability in PKR came amid a hefty depletion in country's official foreign exchange reserves which declined by US$956 million as the country made repayments on its international debt.

Major news flows during the week were: 1) SBP taking various steps to contain foreign exchange outflow, 2) Cabinet approving US$900 million escrow account for Reko Diq in March next year, 3) Bank Alfalah expressing plan to buy back 200 million shares, 4) DFML to start assembling LCVs, 5) first quarter fiscal deficit soaring to one percent of GDP from 0.7% of GDP, 6) Cement, CNG, Fertilizer sectors to face gas shortage in winter and 7) FBR Chairman ruling out any new tax amnesty.

The top performing sectors were: Leasing, Vanaspati and Allied, E&Ps, Refineries and Technology, while the least favorite sectors were: Miscellaneous, Sugar, Textiles, Leather and Tanneries (-0.8%WoW) and Woollen.

Stock-wise, top performers in the KSE-100 Index were PGLC, TRG, FABL, PPL and BAFL, while laggards were: PSEL, SHFA, SCBPL, ILP and FFBL. To five volume leaders for the week were WTL, HASCOL, CNERGY, DFML and FFL.

Flow-wise, Mutual Funds and Banks were the largest buyers in the market during the week, with net buys of US$3.6 million and US$3.0 million respectively. While Foreigners and Insurance Companies were major sellers,
with the cumulative net sells of US$4.7 million and US$6.0 million respectively. The foreign outflow was largely concentrated in sectors namely Banks (US$5.31 million) and Technology (US$1.05 million).

After a relatively stable week for the currency, PKR may yet again come under pressure as foreign currency reserves posted a spectacular decline during the
week, while the inward remittances also slowed down significantly, falling by 9%YoY during October 2022.

On the political front, the things may start heating up once again as country's largest political party starts its
long march once again. Both these factors may yet again prove to be market dampeners and the resurgence that the market showed during this past week may fizzle out once again and the index may see a renewed selling pressure.

Investors are advised to maintain trading positions only and refrain from building and holding long positions in the market.