Pakistan Stock Exchange experiences lack luster week

Pakistan Stock Exchange experienced a subdued week, posted a nominal decline of 365 points (0.46%WoW), primarily due to weakness in the banking sector following news of the continuation of the ADR-based tax.

Average daily trading volume also declined to 356 million shares for the week, down 13%WoW.

The incidence of futures rollover, coupled with it being the last week of the fiscal year overall contributed to the lack luster performance.

Several important data points came in during the week, including a CAD of US$270 million, below expectations of a slight positive balance. This was due to the SBP acting swiftly to clear the backlog of overdue outward dividend repatriations, impacting the balance negatively.

Monthly FDI was reported at US$271 million, up 95%YoY, taking 11MFY24 FDI to US$1.73 billion, up 15%YoY.

Federal Budget for FY25 was approved by the National Assembly on Friday, with several amendments in previously presented finance bill.

These included introduction of a 15% FED on sales by builders/developers, continued concessions on HEV imports, and increased FED on cement, among other changes.

On the external front, foreign exchange reserves held by State Bank of Pakistan (SBP) declined by US$239 million to US$8.9 billion.

The domestic currency continued to strengthen against the greenback, ending the week at PkR278.34/US$ (up 0.06%WoW).                    

Other major news flows during the week included: 1) World Bank approved US$535 million for social protection, livestock development, 2) No cut in gas tariff, 3) Finance Minister issues warning to retailers, 4) the GoP raises PKR908 billion new debt via T-Bills, PIB, and 5) Foreign investors repatriate record US$918 million in May.

The best performing sectors included: Tobacco, Jute and Vanaspati & allied, while ETFs, Refinery and Property were amongst the worst performers.

 Major selling was recorded by mutual funds with net sell of US$5.8 million and other organizations with net sell of US$2.2 million. Brokers and companies absorbed most of the selling with a net buy of US$4.9 million and US$1.5 million, respectively.

Top performing scrips of the week were: MUREB, FABL, PAKT, UNITY and HGFA, while the laggards included: YOUW, MCB, EPCL, CNERGY and CEPB.

With the approval of the Federal budget, clarity on new budgetary measures has emerged, and the market is anticipated to sustain positive momentum as new fiscal year commences.

The focus will now shift to upcoming discussions with the IMF regarding the next EFF program, with a keen eye on their assessment of the approved budget.

The anticipated easing of inflation figures for May 2024 is expected to reinforce positive market sentiment further.

 

 

Pakistan Stock Exchange Records Highest Gain

During this past week the market lost ground in the first two days amidst rumors about potential increases in the Capital Gains Tax (CGT) due to which KSE100 index stayed bearish and the index hit 72,589 level before showing signs of recovery on Wednesday. Market recovered swiftly after the announcement of Federal Budget for FY25. The taxation measures introduced in the budget weren't as adverse as originally anticipated. On Thursday the index gained 3,410 points, most in a single day and closed at 76,706 level on Friday reaching the highest ever closing, with a gain of 2,952 points, up 4%WoW.

Despite initial jitters over proposed tax changes, the market recovered, reflecting investors’ confidence amidst pre-budget uncertainty. The week also saw the State Bank of Pakistan (SBP) announcing a first token rate-cut of 150 bps, adding further to the positivity.

As inflation outlook eases, the cut-off yields in the latest T-Bills auction dropped.

Overall, average trading volumes decreased by 3.8%WoW to 409.6 million shares as compared to 423.3 million shares a week ago.

On the currency front, PPR depreciated by 0.11%WoW to close at 278.51/US$.

Other major news of the week included: 1) RPK9 billion approved for clearing OMCs’ PDCs, 2) ECC allowed conditional export of 0.15 million tons sugar, 3) In FY25 Budget government announced to raise tax to GDP ratio to 13%, 3) government also announced to float US$1 billion bonds and obtain US$4 billion loans from the foreign banks, 4) FY25 Budget aimed raising PKR3.8 trillion new taxes and , 5) World Bank projected Pakistan’s GDP growth at 2.3%.

According to AKD Securities Commercial Banks, Pharmaceuticals, Oil & Gas Exploration Companies, Oil & Gas marketing companies and Paper & Board were amongst the top performing sectors, while laggards included Textile composite, Woollen, Leasing companies, Food & Personal Care Products and Textile Spinning.

Major net selling was recorded by Individuals with a net sell of US$8.9 million. Mutual funds absorbed most of the selling with a net buy of US$11.1 million.

Top performing scrips of the week were: BAFL, MCB, NCPL, UBL and KOHC, while laggards included: ILP, PTC, YOUW, COLG and 5) PGLC.

The post-budget market has attained some certainty, particularly in sectors that benefitted from budgetary measures. With the start of monetary easing, optimism is expected to rise, particularly in cyclical sectors.

Furthermore, the approval of the budget paves the way for the upcoming IMF program, which will likely become a significant market catalyst going forward.

 

Pakistan Stock Exchange index up 1.65%WoW

Pakistan Stock Exchange remained positive during the week ended on May 10, 2024. The benchmark index challenged its highs and closed the week at the highest ever level of 73,086 points, up 1,183 points or 1.65%WoW gain.

Overall, positivity was driven by progress made with IMF, as its team is scheduled to visit the country this month for finalizing the fund size of next EFF program and setting reform targets before the FY25 budget.

The investment story from Saudi Arabia remained prominent, with a 50-member team having visited the country, and the crown prince also scheduled set to visit shortly.

On the macroeconomic front, workers’ remittances in April 2024 remained robust at US$2.8 billion (up 28%YoY), attributed to the Eid impact and reduced gap between interbank and open market exchange rates.

The current account is expected to remain controlled for the April, with a trade deficit for the month anticipated at US$2.4 billion.

Weekly inflation has been on a downward trend for the past three weeks, and overall monthly CPI for May 2024 is expected below the 15% mark, resulting in real interest rates exceeding 700bps. However, additional taxation in the upcoming budget poses a potential risk to the medium-term inflation targets.

Regarding IMF targets for the FY25 budget, initial impressions suggest PKR1.3 trillion in new taxes, with the rationalization of salaried and business tax slabs, along with the implementation of sales tax on tractors and pesticides.

On the reserves front, with an inflow of US$1.0 billion from the IMF, foreign exchange reserves held by the central bank surged to US$9.12 billion, highest in 22 months.

With an overall positive market landscape, participation also increased by 39%WoW, with the average daily traded volume rising to 717 million shares as compared to 516 million shares a week ago.

On the currency front, PKR appreciated by 0.03%WoW to close at 278.1/US$.

Other major news flows during the week included: 1) Government borrowing touched a record level of PKR6 trillion in 10 months, 2) Government hinted at 27% hike in PSDP, and 3) Government announced to frame new industrial policy.

Leather & Tanneries, Pharmaceuticals, Cable & Electrical goods were amongst the top performing sectors, while, Synthetic & rayon, Fertilizer, and Leasing were amongst the worst performers.

Net selling amounted US$4.7 million, mostly absorbed by Foreigners with a net buy of US$2.7 million.

Top performing scrips of the week were: GLAXO, SRVI, CEPB, PAEL, and HINOON, while top laggards included: IBFL, PGLC, EFERT, FATIMA and FFBL.

With the forthcoming visit of the IMF team, the spotlight will undoubtedly be on the tax targets and reforms communicated by the IMF.

Any announcements about the visit of Saudi crown prince could further enhance positivity among investors.

Additionally, lower CPI numbers would likely pique investors' interest in the upcoming Monetary Policy scheduled just after the FY25 budget announcement.

Despite the market reaching record highs, it still maintains discounted valuations.

Investors are advised to maintain heavy positions in fundamentally healthy companies, particularly those with strong dividend yields.