Following this upbeat start, the E&P sector took center stage over developments on clearance of circular debt amounting to PKR1.2 trillion.
As the week drew to a close, conflicting narratives emerged, creating uncertainty around the viability of the circular debt plan. News reports, citing insiders, presented divergent stories—one suggesting the imminent presentation of the plan to the IMF and another reporting objections raised by the Finance Ministry. This uncertainty contributed to corrections observed in the last two trading days, with the likelihood of rate cuts diminishing.
Although discussions around rate cuts gained traction with reduction in cut-off yields in the last T-bills auction, the specter of persistent inflation, projected at 28% for Jan’23, tempered expectations of any rate cut.
The foreign exchange reserves held by State Bank of Pakistan witnessed a weekly increase of US$243 million. The inflow of US$700 million from the IMF was constrained by debt repayments.
Market participation remained cautious due to uncertainties surrounding the circular debt plan and the impending Monetary Policy Committee stance, with average daily traded volume exhibiting a decline of 16%WoW at 392 million shares from 467 million shares in the earlier week.
Other major news flows during the week included: 1) Pakistan and Kuwait to set up US$1 billion fund and 2) Cabinet body set to okay brown-field refinery policy.
Textile Composite, E&P, and Leather & Tanneries companies were amongst the top performers, while Automobile parts & Accessories, Transport, and Property were amongst the worst performers.
Major net selling was recorded by Foreigners with a net sell of US$22.7 million. Insurance absorbed most of the selling with a net buy of US$9.6 million.
Top performers of the week were: OGDC, ATLH, APL, LCI, and HMB, while top laggards included: HCAR, PTC, GADT, JVDC, PIBTL.
Market outlook hinges significantly on interest rate move scheduled to be announced on Monday January 29. While the status quo has already been factored into the market expectations, any surprise rate cut could likely trigger an immediate rally.
The resolution of the circular debt clearance plan in the upcoming week is anticipated to provide clarity to market participants, especially in the context of E&P stocks.
As the elections draw near, the settling dust is indicative of stabilization and with successful completion is anticipated to inject positive momentum into the market.
Investors are advised to seize every opportunity for the accumulation of blue-chip stocks.
