Karachi, August 01, 2022 (PPI-OT): Pakistan Strategy: Jul’22 Market Review and Outlook

FY23 started off on a weak note with index shedding 3.3% of its value in Jul’22. This took the cumulative index return during CY22 to 10.6%. Jul’22 was also a difficult year for PkR as the local currency shed ~17% of its value against US$, the worst monthly performance since 1972. As a result, the US$ adjusted return clocked in ~-20%MoM.

The average daily trading volume decreased to ~223mn shares during the month as opposed to ~298mn during the last month, down 25%MoM. The participation was seen to have remained concentrated in the side scrips with average volumes in KSE-100 index averaging ~73.5mn throughout the month.

The major underperforming sectors during the month were Refineries (-14.4%MoM), Auto Assemblers (-11.0%MoM) and Auto Parts Manufacturers (-9.8%MoM) while the sectors that were able to outperform the benchmark index were Vanaspati (~9.0%MoM), Leasing companies (~4.1%MoM) and Technology (~3.8%MoM).

Market is expected to remain jittery in the short term with GoP looking to increase taxes on manufacturing concerns further on top of what had been approved in Federal Budget 2022-23. The market is unlikely to receive this news favourably as the corporate profitability will erode further which will squeeze the valuations. We advise investors to stay cash rich.