Pakistan Stock Exchange benchmark index posts 3.0%WoW decline

The week ended on June 23, 2023 witnessed gloomy sentiments overwhelming Pakistan Stock Exchange. The benchmark KSE-100 index has experienced bearish sentiments since the announcement of the Federal Budget on June 09, 2023. The Index opened the week at 41,301 points and closed at 40,065, losing 1,236 points or 3.0%WoW.

Daily average traded volume was reported at 131 million shares as compared to 161.7 million shares a week ago, down 19.0%WoW. The market performance has been characterized by the IMF’s disagreement over the federal budget, aggravated by Pakistan’s non-inclusion in the Fund’s board meetings up till June 29, 2023.

Although there are assurances from the Prime minister and other senior officials regarding a positive conclusion to the program, investor sentiments remain bearish.

Foreign exchange reserves held by State Bank of Pakistan (SBP) plunged to US$3.5 billion, excluding the refinanced US$300 million from China and absence of any bilateral flows owing to the stalled IMF program, exacerbating the already precarious situation. Pakistan faces US$10.35 billion debt obligation by the end of December 31, 2023. The exchange parity registered mild gains to close at PKR286.7 to US$.

Other major news for the week were: 1) FBR income tax collection was up 41.0%YoY surpassing the annual target of PkR3,026 billion ahead of FY23 close; 2) SBP mobilized PKR2.43 billion through T-Bills auction, at a flattish yield of 22.0%; 3) current account surplus was recorded at US$225 million for May 2023, as compared to a surplus of US$78 million in April 2023. The deficit for 11MFY23 narrowed by 81% due to curbed imports; 4) FDI declined by 21%YoY during 11MFY23 to US$1.32 billion. Total foreign investment nosedived 82.0%YoY to stand at US$294 million. However, US$149 million inflows were recorded in May 2023, depicting a 6.0%MoM increase in FDI; 5) external government borrowing of US$8.6 billion during 11MFY23 declined by 36.0%YoY.

Leasing Companies, Transport, and Glass & Ceramics have been the worst performers, whilst Tobacco remained the exception.

Major net selling was recorded by Brokers at US$7.7 million. Companies absorbed most of the selling with a net buy of US$10.5 million.

Top performers during the week were: SML, SHEL, PAKT, UPFL, and AGP, while top laggards included MTL, PGLC, YOUW, GATM, and PSMC.

Market is expected to remain range-bound owing to a lack of clarity on the IMF program, stalled bilateral flows amidst a burgeoning debt burden fueling the default risk. Analysts expect the market to react once NA finalizes the Finance Act for FY24, keeping in view proposals put forward by the Senate and other business bodies.

They reiterate their stance of following a cautious approach to stock picking and we continue to advocate dollar-denominated revenue stream scrips (Technology and E&P sector) to hedge against currency risk and high dividend yielding scrips. 

Pakistan Stock Exchange benchmark index plunges 4.8%WoW

Continuation of political uncertainty in the country, following the Punjab and KP government dissolution, kept the market under pressure during the week ended on January 20, 2023.

The KSE-100 index lost 1,915.5 points or 4.8% to end Friday’s trading session at 38,408.0 points. Volumes dried, with daily volumes averaging 143.2 million shares as compared to 183.3 million shares in the earlier week, registering a 22%WoW decline.

On the currency front, the PKR depreciated by 0.66%, ending the week at PKR229.67/US$.

Other major news of week were: 1) July-December 2022 remittances fell 11%YoY to US$14.1 billion, 2) World Bank promised US$615 million for flood-relief work, 3) E&P companies raised alarm on brewing foreign exchange crisis, 4) Barrick Gold plans to start productions in 2028 at Reko Diq mine, 5) GoP to announce RKR200 billion mini-budget to appease IMF, 6) July-November 2022 LSMI output declines 3.58%YoY, 7) FDI plunges 59% during first half of the current financial year, 8) Current Account deficit dipped 60% in H1FY23 on lower imports, and 9) GoP expressed readiness to meet all IMF demands to revive loan program.

The reserves held by State Bank of Pakistan (SBP) showed a WoW increase for the first time in about 8 weeks, up by US$258 million to US$4.6 billion, corresponding to less than 1 month of import cover.

Sector-wise, the top performing sectors were: Modarabas, Leasing companies, and Insurance, while the least favorite sectors were: Cement, Leather & Tanneries and Cable & Electrical Goods.

Stock-wise, top performers were: EFUG, DCR, FFC, COLG, and ABL, while laggards included: KTML, CHCC, KOHC, CEPB, and TGL.

Foreign Investors were the major buyers with net buy of US$4.88 million, followed by Banks/DFIs with net buy of US$4.07 million.

Mutual funds were major sellers, with a net sell of US$9.64 million followed by Insurance companies with a net sell of US$4.96 million.

The market trajectory next week would be determined by the Monetary Policy Committee decision, scheduled to meet 23 January 23, 2023. Market is largely expecting a 100 bps increase in policy rates. It seems the market has already priced in the 100bps hike, and any deviation in the decision could impact the market.

In addition to this, the external position of the country would remain in focus, with the delay in resumption of the IMF program detrimental to the sentiment in the market.

The IMF’s stamp of approval would unlock flows from bi-lateral and multilateral sources—the need of the hour considering the alarming reserves position of the country.

The GoP would have to take difficult decisions to appease the IMF, which includes additional revenue collection of PKR200 billion and gas and electricity tariff hikes, along with a market-determined exchange rate.

We continue to advocate companies that have dollar-denominated revenue streams as the weakness in the currency is expected to persist.

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 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.

Pakistan market witnesses 18 percent increase in daily trading volume

At Pakistan Stock Exchange, volatility on concerns regarding domestic politics and jitters from global monetary policies failed in deterring investor, if  a few chose to take an exit others were more than willing to enter. This is evident from the fact that that the benchmark index posted a marginal decline of 1.44%WoW and the market closed the week ended on 23^rd September 2016 at 39,782, not too far from coveted 40,000 level.

Volumes remained robust with daily average for the week rising close to 728 million shares (up 18%WoW), though concentrated in sideboard scrips with leaders for the week included: WTL, PACE, BOP, DSFL and TRG. Foreign selling persisted with outflows for the week exceeding US$16 million as compared to US$4.5 million in the previous five sessions. Leaders at the bourse were: HCAR, MTL, ASTL, EPCL and FATIMA; laggards were LOTCHEM, DAWH, SNGP, AKBL and FFC.

Key news flows of the week included: 1) PIB auction yields remained largely stable with GoP raising Rs219 billion, 2) World Bank approved US$390 million loan for Tarbela fifth extension project, 3) current account deficit for 2MFY17 touched US$1.3 billion, an increase of 92%YoY, 4) news reports indicated that Shanghai Electric Power has qualified as final bidder for an estimated US$1.6 billion stake in KEL while the latter announced its intention to acquire 40.25% stake in KAPCO and 5) Ministry of Industries and Production decided to seek approval of the ECC for further reduction in urea prices in order to offload 1.5 million tons of stock. Pakistan’s central bank is scheduled to release its monetary policy statement later on Saturday; with wider expectations no change in interest rate. It is likely to remain a non‐event for the market. Political risks remain in place with PTI’s protest set for next week likely keeping investors cautious. On the global front, following no reduction in interest rate by the US Fed, the focus will now remain on oil producers’ meeting next week, which is also likely to fail in arriving at any consensus at containing output.

Rising sharply, Pakistan posted current account deficit for August'16 at US$721 million compared to US$595 million a month ago. Consequently, 2MFY17 deficit accumulated to US$1.32 billion rising 92%YoY due to 1) rising trade deficit as imports growth accelerated, 2) remittances were still 3%YoY lower in 2MFY17 despite recovery during the month under review and 3) absence of US$337 million CSF payments received in first two months of the current financial year. According to details, imports grew at 13.9%YoY on the back of higher machinery imports (up 85%YoY) while exports continued to slump (down 9.35% YoY) keeping trade deficit at US$2.67, 35.5%YoY higher. Remittance flows normalized to US$1.76 billion for the month, up 15.3%YoY/32.5%MoM. Going forward, analysts expect trade deficit weakness to persist, which accompanied by the deceleration in remittances growth is likely to keep current account deficit higher during the ongoing fiscal year, if no remedial steps are taken to boost exports and remittances.