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. 

Miftah Ismail sounds too amateur

Finance Minister Miftah Ismail said on Thursday that he was leaving for Washington to meet International Monetary Fund (IMF) officials for the revival of a loan facility. In the same breath he added to travel to London on the way, where he would meet PML-N supremo Nawaz Sharif.

He disclosed his intension to meet the IMF Managing Director, Chief Executive Officer of the World Bank, Ministers of Turkey, Saudi Arabia and China. If he has planned so many meeting, was any agenda prepared or it will be just saying hello to each other?

On Wednesday, he had told media persons that his priority was to secure one tranche of US$1 billion from the IMF and prepare for the coming budget and not to club two quarterly reviews.

He didn’t bother to thank overseas Pakistanis who have sent more than US$23 billion in nine months of the current financial year. One may recall, his government has decided not to give voting rights to overseas Pakistanis, despite their longstanding demand.

He was a bit ruthless in saying that the IMF program was stalled following the premature end of the Imran Khan government. He was not cognizant of the fact that the no-trust motion, which brought Imran Khan Term to an abrupt end, was initiated by his party in collaboration with political parties?

Ismail revealed that the IMF wanted Pakistan to do away with subsidies extended by the previous government, including those on fuel prices and power tariffs — two relief measures that former Prime Minister Imran Khan had announced right before the filing of a no-trust motion against him. The move had invited criticism with many describing it as going against Pakistan's commitments to the IMF for the US$6 billion Extended Fund Facility.

He failed to recall that soon after coming into power Shehbaz Sharif, refused to approve a summary of hike petroleum prices prepared by Oil& Gas Regulatory Authority (OGRA).

It may be worth reminding that the single-point maiden meeting of the Economic Coordination Committee (ECC) of the newly formed federal cabinet on Tuesday approved Rs69 billion for immediate reimbursement of price differential claims (PDCs) to the oil industry on account of cheaper sales of petroleum products than the cost of purchase. Wasn’t this a violation of commitment with the IMF?

In an attempt to contain budget deficit he expressed intention to save by cutting the development budget to Rs600 billion, instead of Rs900 billion, which might not be spent in any case by the ministries.

He was delighted to inform, “We will not cut a penny out of Benazir Income Support Program”. He went to the extent of saying to compensate; wheat flour price has been reduced by Rs150 per 10kg, while sugar would be sold at Rs70 per kg through utility stores. Edible oil price has also been reduced. Has he any realization that selling at reduced price, means providing subsidy?