Karachi, December 01, 2021 (PPI-OT): Pakistan Strategy – Nov’21 market review and outlook

Drawing curtains to MSCI EM, KSE-100 closed Nov’21 at 45,072.4pts denoting a -ve 2.5% performance during the month while marking the highest volatility CYTD. Avg. volume for the month stood at 316.1mn shares compared to 279.7mn shares in Oct’21 with activity largely tilted towards mainboards (KSE/KSE-ALL volume at 29.1% vs. 26.7% FYTD).

Factors at play were, i) Central Bank mounting on aggressive monetary tightening (150bps hike in policy rates and 1% increase in cash reserve requirements of Commercial Banks), ii) Pakistan reaching staff-level agreement with the IMF, iii) authorities successfully deploying diplomatic relations with Saudi Arabia to gain US$3bn in deposits and US$1.2bn in oil deferral facility, and iv) MSCI related rebalancing.

Foreigners’ net sell stood at US$141.3mn in Nov’21 particularly related to MSCI-related rebalancing. Fresh inflows were witnessed in Commercial Banks (though US$64.6mn lower than outflow) and Techs (net buy: US$3.86mn).

With ease-off in global commodities improving Pakistan’s macro-outlook, IMF-related uncertainty largely behind and MSCI-related re-balancing complete, market is poised for a strong year-end performance in our view. That said, Nov’21 inflation at 11.53%YoY with signs of higher inflationary readings in coming months would keep investors on toes with regards to the pace of monetary adjustments in our view.