NEPRA’s announcement to increase the average national power
tariff by PKR4.96/unit for FY24 was met with strong disapproval and countrywide
protests.
The business communities and other political parties showed
dismay as well and criticized DISCOs over the levied capacity charges on
consumers. Moreover, the Finance Division allowed for a massive hike in petrol
and diesel prices.
After much anticipation of upheaved inflation figures,
August’s CPI was announced as 27.4%, giving a source of comfort during a crunch
period.
Given elevated demand for the greenback, Pak rupee witnessed
an erosion of 1.4%WoW, reaching PKR305.47 against US$ on Friday. Furthermore,
towards the week’s end, the gap between the interbank and open market exchange
rates remained 7.4%.
According to the IMF agreement, this gap should not be
±1.25% for 5 consecutive days. Moreover, the forex reserves held by the central
bank declined by US$81 million to US$7.85 billion owing to debt repayments and
July’s current account deficit can put additional strain on reserves.
Cumulatively, these reasons have had a negative impact on the market.
To curb the gas sector’s revolving circular debt, Petroleum
Ministry is gearing for a 60% increase in gas prices.
On the bright side, FBR has provisionally collected PKR1.21 trillion
during first two months of FY24, against a target of PKR1.18 trillion, reflecting
an increase of PKR24 billion.
Market participation witnessed a decline, with traded volume
averaging at 187 million shares, as compared to the previous week’s average of
206 million shares.
Other major news flows during the week included: 1) Foreign
investors’ buying in August reported at US$12.87 million, 2) PIA demanded PKR23
billion bailout from government, 3) CMEC announced to halt production at Thar
coal mines given non-clearance of US$50 million, 4) Total tax collected from
power sector including electricity bills was reported at more than PkR160bn for
FY23, 5) SBP adopted certain AAOIFI’s Shariah standards, 6) Income tax
department levied super tax on non-resident companies in negation of double
taxation treaties, 7) DISCOs withdrew up to 41% less power from national grid
in 4QFY23, and 8) slightly over 8 million mobile phones were manufactured by
local plants during Jan-July 2023 period.
Textile weaving was the top performer, while close end
mutual fund/ power generation & distribution/ automobile parts &
accessories were amongst the worst performers. Major selling was recorded by
Banks/DFI with a net sell of US$6.26 million. Insurance companies absorbed the
selling with a net buy of US$7.9 million.
Top performing scrips of the week were: SCBPL, INDU, HMB,
AICL, and NRL, while top laggards were: HGFA, DGKC, NML, APL, and NCL.
Going forward, market is in commensuration with outcomes of
1) upcoming Monetary Policy Committee meeting on 14th September, 2) ensuing
review with IMF in October, and 3) developments encircling energy reforms.
In the event of an interest rate hike, cyclical sectors may
face turbulence, although market has already adjusted for this impact.
Analysts reiterate following a cautious approach while
picking stocks and continue to advocate US dollar-denominated revenue stream
scrips (Technology and E&P sector) to hedge against currency risk or high
dividend yielding scrips.
