Karachi, November 01, 2022 (PPI-OT): Pakistan Strategy: Index remains flat amidst political turmoil

The index remained largely flat during the month, with the euphoria of Pakistan’s exit from the FATF grey list overshadowed by political noise following the announcement of the long march. Resultantly, the KSE-100 index ended the month of October having edged up only by ~136pts or 0.33%. The cumulative performance on a CYTD basis stands at -7.5% as of month-end.

Participation at the bourse improved during Oct’22, with the average daily volumes increasing from 254.8mn shares in the previous month to 380mn shares in Oct’22. However, KSE-100 average daily traded volume increased by a minor 2% from 93.6mn shares to 95.4mn shares in Oct’22 – indicating an even further tilt away from blue chip stocks.

The highlight of the month was Pakistan’s exit from the FATF’s grey list after more than four years – announced on Oct 21, 2022. The whitelisting is expected to ease the scrutiny in raising international funding, at a time when the company’s external financing needs stand at ~US$32bn. Furthermore, FDI in the country is expected to be bolstered by the white listing. Alongside this, the ADB approved a US$1.5bn outlay to Pakistan, which alleviated external concerns for the country.

Following the change at the helm of the Ministry of Finance, the currency appreciated by 3% during the month from PkR228.45/US$ in the earlier month to PkR220.89/US$ at the end of the month.

Market direction will remain contingent on the developments on the economic and political front. However, any political fallout from the ongoing long march could pivot the market’s trajectory. Moreover, the IMF is scheduled to hold Pakistan’s review Nov’22, deciding the fate of the next tranche (expected in Dec’22). AKD’s universe currently trades at the forward PER of 4.0x.