Karachi, July 22, 2022 (PPI-OT): Weekly Review
The bourse witnessed a turbulent week on account of political uncertainties majorly on the back of Punjab elections and massive currency devaluation, majorly on the back of oil payments. The index dropped by 1968 points (-4.75%) to close at 40,077pts during the week, while activity remained slow/flat falling by ~8% as compared to last week. On the macro front, PkR/USD depreciation was a shocker, as the domestic currency fell by 8.3% during the week to end PkR228/$. Furthermore, PTI’s victory in the bi-election of Punjab caused further uncertainty, causing international credit raters (Moody’s and Fitch) to downgrade the country’s rating to ‘negative’.
Lastly, SBP reserves also fell by $US389mn to end at $US9.3bn, as compared to previous week’s $US9.7bn. The market participation remained very dull where the average daily turnover decreased 8% WoW to ~177.6mn shares in the KSEALL-share index. On the commodities front, MS/HSD prices fell by PkR18.5/40 during the week, on the back of falling global crude prices (ranging between $US91/bbl and $US102/bbl during the period), quoted by the prime minister as part of measures to ease the burden on the masses.
Other major news flows during the week were; i) Saudi Arabia says no additional capacity to increase oil production beyond 13 million bpd, ii) FY22: Over $31bn record remittances received, iii) Pakistan international bond yields surge to 50.6%, iv) IMF wants assurance on Saudi funding to Pakistan before it disburses loan, v) FY22 FDI surges 2.6% to USD1.87bn, vi) Power generation falls in peak demand season, and vii) non-textile exports soar to $12.5bn. Sector-wise, amongst mainboards, Vanaspati and Allied Industries, close-ended mutual funds and Leasing companies were amongst the top performers, up 5%/5%/1%WoW respectively.
On the other hand, Textile Weaving was amongst the worst performers with a decline of 10%WoW for the week. Flow wise, major net selling was recorded by Mutual funds (net sell: US$7.76mn), similarly Insurance also remained net sellers during the week (net sell: US$2.2mn). On the other hand, Individuals absorbed most of the selling with net buy of US$5mn. Stock wise, top performers include, i) HGFA (+6.2%WoW), ii) SML (+5.4%WoW), iii) HINOON(+0.6%WoW), iv) MUREB (+0.5%WoW), and v) DCR (+0.3%WoW), while top laggards were, i) SNGP (down 19.8%WoW), ii) EPCL (down 14.7%WoW), iii) MLCF (down 13.2%WoW), iv) CHCC (down 12.7%WoW), and v) UNITY (down 12.7%WoW).
Outlook
Market activity is expected to remain slow as investor seek to end uncertainty on the macro and political front, even though staff level agreement has been reached with the IMF, there still seems to be a funding gap for FY23 expenditures. Until future funding from lenders/partners is ensured, domestic currency is expected to remain volatile, subsequently keeping investor confidence muted. However, recent slump in commodity prices may be a positive development for country’s external account. Aside from lower inflation, lower oil prices may give the Gov’t space to begin collecting PDL and sales taxes once more without putting more burden on consumers. We recommend market participants to stay cautious and focus on defensive plays. Any good bull run should be taken as an exit point.