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AKD Securities Limited – Stock Smart (December 02, 2022)

Karachi, December 02, 2022 (PPI-OT): Weekly Review

The bourse witnessed an overall volatile week as uncertainty regarding the International Sukuk payment of US$1.1bn lingered amongst market participant, squeezing the overall sentiment and volumes alongside it. Participation in the market remained overall slow, with daily average volumes traded clocking in at 161.75mn shares, compared to 159.58mn shares traded in the earlier week. The benchmark KSE-100 Index lost 786points during the week, depicting a 1.83% fall in the index. The PkR also lost some footing against the US$, devaluing by 0.11% to end at PkR223.69/US$ on Friday. However, CPI, still at multi-year highs, clocked in at 23.8% for Nov’22, lower than expectations vs. 26.6% in Oct’22.

Finally, Trade deficit for Nov’22 stood at US$2.8bn, down 42%YoY while SBP’s FX reserves stood at US$7.5bn as at 25-Nov’22. On the international front, crude oil remained volatile, averaging at US$85/bbl as the global commodity remained in a limbo on the back of on/off Chinese lockdowns and EU’s discussions to work towards an agreeable price cap on Russian crude.

Other major news flows during the week were; i) Sensitive Price Indicator (SPI) rose 0.48%WoW, ii) PTI huddle resolves to dissolve Punjab, KP assemblies, iii) Finance Minister Ishaq Dar confirmed the receipt of US$500 million from the Asian Infrastructure Investment Bank (AIIB), iv) SBP raised PKR 214 billion through the auction of market treasury bills against target of PKR 850bn, v) Pakistan’s real effective exchange rate (REER), the value of the rupee against a basket of trading partner currencies, rose to 100.4 in October from 90.7 in the previous month. Sector-wise, amongst mainboards, Miscellaneous, leasing companies and Vanaspati and Allied Industries were amongst the top performers, up 5.7%/4.1%/1.9%WoW respectively. On the other hand, Close – end mutual fund, Engineering and Cement was amongst the worst performers with a declines of 9.5%/7.0%/5.9% WoW.

Flow wise, major net selling was recorded by Mutual Funds (net sell: US$6.3mn). On the other hand, Individuals absorbed most of the selling with a net buy of US$4.19mn. Company-wise, top performers during the week were, i) PSEL (+24.3%WoW), ii) PGLC (+6.1%WoW), iii) IBFL (+5.1%WoW), iv) HUBC (+3.5%WoW), and v) SRVI (+2.2%WoW), while top laggards were, i) PIOC (down 14.1%WoW), ii) HGFA (down 11.3%WoW), iii) CHCC (down 10.9%WoW), iv) MLCF (down 10.8%WoW), and v) MUGHAL (down 9.8%WoW).

Outlook

The market is expected to remain range-bound in the near future, with the risk-free rate standing at 16% currently, equities continue to be unappealing for investors. Furthermore, news regarding the International Sukuk payment of US$1.1bn and the FX reserve position thereafter will be in focus. Furthermore, any developments regarding the 9th review by the IMF would remain in the limelight, with a positive outcome possibly restoring sentiment regarding Pakistan’s external position. On the other hand, markets could further be pressured by political uncertainty, hence, keeping this in view, we advise investors to fetch out safer plays/defensive stocks.

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