Karachi, July 01, 2022 (PPI-OT): Weekly Review
After an astounding super tax imposed on 13 sectors on Friday last week, the KSE-100 index started the week with robust performance gaining 827pts on Monday but was unable to continue its momentum and followed a topsy-turvy ride over the rest of the week. Uncertainty on IMF front, US$1.4bn (+131%MoM) CAD for May’22, fear of 100-150bps rise in policy rate in next MPS and amendments in finance bill approved in the National Assembly dominated the market sentiment throughout the week and the benchmark KSE-100 index gained 1.41%WoW to close at 41,630pts. The market participation remained sluggish where the average daily turnover decreased 33.8%WoW to ~198.8mn shares.
Moreover, the rupee sustained its gain against US$ to close at 204.8/US$, appreciating ~1.31%WoW. SBP also conducted T-bill auction this week where the central bank raised PkR1.65tn against the target of PkR0.8tn. Furthermore, SBP also raised PkR209bn on PIB-Floating rate notes with tenures of 2 and 3 years. Other major news flows during the week were; i) Govt. increased prices of petrol and diesel by PkR14.8/ltr and PkR13.23/ltr, respectively, ii) SBP’s reserves increased by US$2.1bn to US$10.3bn, iii) Cement prices increased by PkR50/bag in the north, iv) Gas supply to export and non-export sector cut off till 9th Jul’22 in Punjab and v) Headline inflation for Jun’22 clocked in at 21.3%YoY vs 9.7%YoY in Jun’21. Sector-wise, the top performing sectors were; i) Textile Weaving (+8%WoW), ii) and Pharmaceuticals (+5%WoW), while the least favourite sectors were; i) Refinery (-1%WoW) and ii) Modarabas (-1%WoW). Stock-wise, top performers were; i) YOUW (+11.6%WoW), ii) PSMC (+11.1%WoW), iii) HCAR (+8.8%WoW), iv) DGKC (+8.7%WoW), and v) SNGP (+7.0%WoW), while laggards were; i) SCBPL (-4.3%WoW), ii) ASL (-4.2%WoW), iii) KAPCO (-3.8%WoW), iv) SML (-3.6%WoW), and v) EPCL (-3.4%WoW). Flow wise, Banks/DFI remained the major buyers with (net buy of US$6.8mn) followed by Individuals (net buy of US$4.1mn) while Insurance Companies stood on the other side with (net sell of US$12.2mn) followed by Mutual Funds (net sell of US$2.6mn).
Outlook
Market volatility will continue to remain high with the near term economic outlook remaining hazy as the official announcement of revival of IMF program is still awaited. In the meantime, the reserve hemorrhage will continue as the current account position remains challenging. Moreover, we expect SBP to raise the interest rates by another 150bps in the upcoming MPS. Sector wise, we prefer the Refineries and IT sectors based on prevalent macro-economic conditions, and advise investors to maintain a cautious approach in the market, taking any bull-run as a good exit point.