Pakistan Stock Exchange benchmark index declines 9% in CY22

Economic and political issues badly affected Pakistan Stock Exchange (PSX) in 2022. The benchmark index, KSE-100 index, declined 9% during the year. With PKR depreciating 22% against greenback, Index was down 29% in US$ terms.

According to Pakistan’s leading brokerage house, Topline Securities, 2022 was also a turbulent year for global stock markets as US$18 trillion were wiped out in 2022 with drop of approx 20% in MSCI World Index which is worst performance since the 2008 crisis. MSCI EM fell 22%, while MSCI FM was down 29% in 2022.

According to Bloomberg data, Pakistan’s KSE-100 Index was amongst worst performing market in US$ term in 2022.

Due to macroeconomic issues, activity at PSX also remained dull. Average traded volume (ready/cash) per day at PSX was down 52% to 230 million shares/day.

Similarly, average traded value per day was down 59% to PKR7 billion/day which was lowest since 2019.

In futures market, total traded volume and value per day were also down by 33% and 56% to 94 million shares and PKR3.6 billion, respectively.

KSE-100 Index also underperformed as compared to other asset classes in 2022 including Gold (+45%), one-year US$ denominated Naya Pakistan Certificate (+36%) and greenback (+28%).

T-Bills, Money Market Fund and Property indices posted return in the range of 12% to 14% in 2022.

Initial public offering (IPO) market was also impacted due to eroding equity values as only 3 IPOs raised funds in 2022 as against 8 IPOs in 2021. The number of IPOs was also the lowest in 2019 when Pakistan saw just one IPO at PSX.

Selling by foreigners continued in 2022 with net selling of US$127 million. In last 7-years, foreign corporates have sold shares worth of US$2.5 billion at PSX.

Local Mutual Funds and Insurance Companies also trimmed their position in 2022, with Mutual Funds selling US$166 million, while Insurance Companies sold US$128 million.

Selling was absorbed by Local Individuals, Banks and Companies with net buying of US$138 million, US$117 million, and US$78 million respectively.

 

Pakistan stock market witnesses 12 percent increase in daily trading volume

Exhibiting signs of investor weariness and mixed responses to earnings releases, the benchmark index of Pakistan Exchange (PSX) closed the week ended 10^th February 2017 at 49,925 points. Market participants’ response to earnings announcements swayed greatly, with investors continuing to favor higher payouts over earnings growth, and corporate action, particularly in cements kept the sector in the limelight. Average traded volumes rose to 414 million shares, up 12%WoW. Key news flows were: 1) PSMC launched imported luxury sedan Suzuki Ciaz at competitive price, 2) International Steel Limited (ISL) stated in a filing that the National Tariff Commission (NTC) has decided to impose definitive anti‐ dumping duties on galvanized steel coils/sheets for a period of five years, 3) PSO's receivables from different enterprises, particularly power companies, have swelled to Rs277 billion, and 4) As per State bank of Pakistan foreign exchange reserves of the country declined by US$413 million to US$22.03 billion by 3^rd February and the external sector faces increased pressure as its trade deficit widened by 29%YoY to US$17.4 billion during 7MFY17 due to paltry exports and double digit growth in imports. Top performers at the bourse were: LOTCHEM, NBP, ASTL, NML, whereas laggards were: PTC, HUBC, AGTL and ABL. Volume leaders for the week were LOTCHEM, KEL, POWER and TRG. Oil is set to grab the spotlight in the coming week, where crude benchmarks are beginning to inch upwards on positive reviews of the OPEC and non‐OPEC output freeze. Results will remain the center of gravity, where companies reporting in the coming week include AGTL, HBL, FCCL, MLCF, DGKC, UBL, ENGRO and OGDC.

Commencing this week, commercial banks are scheduled to declare their CY16F/4QCY16F results. The first was MCB (8^th Feb), followed by ABL (9^th Feb) HBL (15^th Feb). As a group, the Big‐6 banks are likely to post cumulative profit after tax of Rs127.5 billion for CY16 as compared to Rs129.7 billion for CY15, a decline of 2%YoY. Top‐line growth is likely to be constrained on account of lower yield on earning assets amid ongoing PIB substitution and lower banking spreads (4QCY16 spreads lower by 26bps YoY). However, improvement in credit quality has restricted the earnings decline with provisioning charges for the Big‐6 down by a sizable 81%YoY for CY16. That said, revaluation surplus likely to improve by a significant Rs176 billion, where higher utilization of the same can cause earnings expectations to deviate particularly in case of banks like MCB, NBP and ABL that have sizeable equity portfolios in addition to the bonds portfolio. While CY16 results are expected to remain flattish, price performance should remain hinged upon the following: 1) higher than expected payouts, 2) earlier than expected monetary tightening, 3) formal inclusion into MSCI EM with HBL, UBL and MCB likely to make it to the list.

Latest APCMA data showed that cement dispatches during January'17 remained relatively flat at around 3 million tons, while it fell 12.86%MoM due to heavy rainfall/snowfall impacting local construction activity (domestic demand, a decline of 14.56%MoM to 2.722 million tons in January'17). Exports also remained subdued during the month and declined by 2.71%YoY/+1.85%MoM) due to rising fuel prices/other input costs and import/anti‐dumping duties making it more difficult for Pakistan's exported cement to compete against the indigenous cement. Greater intensity of seasonal effect has slowed down the cumulative domestic demand growth was 9.52% in 7MFY17 as compared to 15.66% in 7MFY16. Though, analysts expect exports growth to remain flat due to prevalence of aforementioned issues, they also believe that domestic demand growth will likely resume double digits growth as construction activity is expected to pick pace due to relatively greater proportion of PSDP releases in second half of fiscal year and record level growth in private sector credit related to construction activity, up 25.25%YoY.

Two of the largest IPPs of Pakistan HUBC and KAPCO are also scheduled to announce their half yearly financial results. HUBC is anticipated to post profit after tax of Rs5.25 billion for 1HFY17 (down marginally) on the back of muted generation, Pak Rupee remaining firm against greenback and picking up of RFO prices. Expensing of higher O&M charges, inflated admin expenses and investment in associate related expenses are expected to taper profitability, while the higher receivables burden is expected to raise financial costs. KAPCO is forecast to post 1HFY17 net profit of Rs4.67 billion up 8%YoY, from lower generation, slight improvements in generation on gas and below the line expenses remaining in check. Devoid of major movement on the expansion front (financial close of CPHGC, TEL, KAPCO Energy) IPPs are expected to remain in the sidelines, for the time being.

Pakistan Stock Exchange closes January 2017 almost flat

While the benchmark index of Pakistan Stock Exchange mostly remained on upward trajectory during January 2017, various factors also plunged it down. However, the month posted a nominal increase of slightly less than 2 percent. Though, the index breached 50,000 barrier it failed in sustaining this level and the month closed at 48,758 points.

The factors keeping the market under pressure included: 1) political volatility due to Panama case, 2) deteriorating economic indicators, 3) apex regulator enforcing rules more stringently and 4) foreign investors offloading their holdings. While foreigners remained net seller, local investors bought at dips.

Barring Automobiles and Chemical, all other major sectors posted flat returns. On top of that Oil & Gas and Commercial Banks ended in the red. The performance of market was mainly led by second tier scrips. As stated earlier, local participation remained robust, with average daily trading rising to 443 million shares, a hike of 26 percent.

Foreigners continued to trim their holding as part of the global strategy, with a net outflow of almost US$111 million during the month under review, taking net outflow to a whopping US$409 million. Positions were offloaded in Power Generation, Banks and Chemicals.

Going forward, the market is likely to take direction from the ongoing results season where strong earnings growth by Banks, Cements and Autos is likely to provide impetus to the market performance.

Pakistan discovers a tiny gas field

Oil and Gas Development Company (OGDC) has made another gas discovery with initial production of 23.50mmcfd from its exploratory well in Sukkur in Sindh province of Pakistan.

According to the information provided to Pakistan Stock Exchange (PSX) by OGDC the Thal East well #01 was drilled down to the depth of 4,468 meters whereby reserves of hydrocarbon have been found in Basal Sand of Lower Goru Formation.

The details further says one more zone in Lower Goru Formation Sand is available which is yet to be tested and hopefully will add more reserves.