Karachi, January 20, 2023 (PPI-OT): Weekly Review
Continuation of political uncertainty in the country, following the Punjab and KP government dissolution, kept the market under pressure during the week. The KSE-100 index lost ~1,915.5 pts, or 4.8% during the period, to end Friday’s trading session at 38,408.0pts. Volumes were dry during the week, with daily volumes averaging 143.2mn shares in the KSE-All during the week, compared to 183.3mn shares in the previous week, showing a dip of 22%WoW. On the currency front, the PkR depreciated by 0.66% or PkR1.51/US$ over the past week against the US$, ending the week at PkR229.67/US$.
Other major news during the week include: i) Jul-Dec remittances fall 11pc to $14.1bn YoY, ii) WB diverts $615m for flood-relief work, iii) E and P companies raise alarm on forex crisis, iv) Barrick Gold plans to start productions at Reko Diq mine in 2028, v) Rs200b mini-budget to appease IMF on cards, vi) Jul-Nov LSMI output declines 3.58pc YoY, vii) FDI plunges 59pc during HIFY23, viii) C/A deficit dips 60pc in H1FY23 on lower imports, ix) Govt ready to meet all IMF demands to revive loan programme. Furthermore, the reserves with the SBP showed a WoW increase for the first time in about 8 weeks, up by ~US$258mn to US$4.6bn, corresponding to less than 1 month of import cover.
Sector-wise, the top performing sectors were; i) Modarabas (+2%WoW), ii) Leasing companies (+0.8%WoW), and iii) Insurance (+0.3%WoW), while the least favourite sectors were; i) Cement (-8.7%WoW), ii) Leather and Tanneries (-7.9%WoW) and iii) Cable and Electrical Goods (-7.4%WoW). Stock-wise, top performers were; i) EFUG (+2.1%WoW), ii) DCR (+0.3%WoW), iii) FFC (+0.1%WoW), iv) COLG (+0.1%WoW), and v) ABL (+0%WoW), while laggards were; i) KTML(-15.9%WoW), ii) CHCC(-15.5%WoW), iii) KOHC (-13.7%WoW), iv) CEPB (-12.8%WoW), and v) TGL (-12.7%WoW). Flow wise, Foreign Investors were the major buyers with net buy of US$4.88mn, followed by Banks/DFIs with net buy of US$4.07mn, On the other hand, Mutual funds were major sellers during the week, with a net sell of US$9.64mn followed by Insurance companies with a net sell of US$4.96mn, respectively.
Outlook
The market trajectory next week would be determined by the MPC decision, scheduled to meet on 23 Jan, wherein the market is largely expecting a 100bps increase in policy rates. We believe that 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 resumption of the IMF programme 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.
However, the government would have to take difficult decisions to get the IMF onboard, which includes additional revenue collection of PkR200bn 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 remain, which include the Technology and E and P sectors.