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AKD Securities Limited – AKD Daily (December 01, 2022)

Karachi, December 01, 2022 (PPI-OT): Pakistan Strategy: Index gains in Nov’22, Rate hike dampens outlook

KSE-100 index gained 2.6% or 1,084 points during the course of the month. At the start of the month, the market was pressured by the assassination attempt on Imran Khan. However, the market rebounded quickly, reaching a high of 43,000 points.

The SBP’s surprise move to hike interest rates by 100bps near the end of the month reversed the gains from earlier, with the market losing ~865pts in the next trading session.

Average participation during the month remained lackluster at 286mn shares, compared to 296mn shares in the earlier month, with the KSE-100 index average volumes dropping substantially from 94mn shares in Oct’22 to 83mn shares in Nov’22 – indicating a tilt away from the main board and towards side stocks during the month.

Technology and Communications sector posted gains of 12.3%MoM during the month, with TRG and SYS posting gains of 31% and 12.8%MoM, respectively. The star of the sector was TRG during the month, with the news of a possible acquisition of Ibex Global Holdings Limited by CVC Capital Partners making the rounds.

The high interest rates in the country are likely to remain a reality for longer as external debt principal and interest servicing, amidst dwindling reserves, could keep inflationary pressures mounting, making the case for high policy rates to persist.

Market participants are likely to be eyeing the upcoming IMF’s 9th review of Pakistan. Ahead of the discussions with the IMF, the Finance Ministry has been implementing the group’s recommendations, as evident from the increase in Petroleum Development Levy on HSD to PkR25/liter in the latest price revision. However, the market is expected to remain range-bound given the high interest rate environment in the country.