AKD Securities Limited – Stock Smart (January 06, 2023)
Karachi, January 06, 2023 (PPI-OT): Weekly Review
The index witnessed an overall volatile week as depleting currency reserves continued to fuel uncertainty throughout, as SBP FX reserves have fallen by approximately US$2bn since Dec’22 began, pulling import cover down to just 1.1x. Although, some respite was seen towards energy stocks such as PPL, OGDC and refineries with news amidst gas circular debt resolution and fresh investment in a coastal refinery from Saudi Arab (aided by the much anticipated refinery policy). Overall, average trading volumes remained down, clocking in at 176mn shares, compared to 214.2mn shares traded in the earlier week. The benchmark KSE-100 Index gained 588 points during the week, depicting a 1.45% increase in the index.
The PkR also lost some footing against the US$, devaluing by 0.31% to end at PkR227.14/US$ on Friday. However, CPI, still at multi-year highs, clocked in at 24.5% for Dec’22, lower than expectations vs. 26.6% in Oct’22. Finally, Trade deficit for Nov’22 stood at US$2.79bn, down 28.4%YoY while SBP’s FX reserves stood at US$5.6bn as at 30-Dec-22. On the international front, crude oil remained volatile, averaging at US$82.1/bbl as the global commodity remained in a limbo on the back of on/off Chinese lockdowns and the emergence of the newer COVID Omricon variant.
Other major news flows during the week were; i) Pakistan will have to repay $1.3 billion in foreign loans by January 10, 2023, 2) Annual inflation measured by the Consumer Price Index (CPI) was recorded at 24.5% in December, 3) The federal cabinet, on Tuesday, approved the Energy Conservation Plan, barring fresh restrictions on wedding halls and markets, 4) Pakistan is eying generating around $8 billion from the international community and donor agencies for the rehabilitation and reconstruction of the flood-affected people, 5) Finance Minister Ishaq Dar on Wednesday claimed that friendly countries have announced their support. Sector-wise, amongst mainboards, Miscellaneous, Refinery and Transport were amongst the top performers, up 10.7%/8.9%/4.6%WoW respectively.
On the other hand, Vanaspati and allied industries, Leather and Tanneries and Cable and Electrical were amongst the worst performers with a declines of 7.2%/5.6%/5.3% WoW. Flow wise, major net selling was recorded by Mutual Funds (net sell: US$2.9mn). On the other hand, companies absorbed most of the selling with a net buy of US$3.2mn. Company-wise, top performers during the week were, i) PSEL (+14.3%WoW), ii) SHIFA (+13%WoW), iii) ATRL (+12.9%WoW), iv) PPL (+11.8%WoW), and v) SNGP (+10.8%WoW), while top laggards were, i) PSMC (down 17.4%WoW), ii) HCAR (down 17%WoW), iii) KEL (down 12.2%WoW), iv) GADT (down 10.2%WoW), and v) GATM (down 8.7%WoW).
The market is expected to remain under pressure in the near future, driven by the weakness in the PkR against the USD and the concerns regarding the country’s fiscal health. Pakistan will have to repay around $8.3bn in shape of external debt servicing over next three months of current fiscal year. Additionally, the political uncertainty and any developments regarding the 9th review by the IMF would remain in the limelight, which would unlock inflows from friendly countries. Consequently, the market will remain jittery amid uncertainty over economic fronts. Therefore, we continue to advise a cautious approach while building positions in the market.