Karachi, September 01, 2021 (PPI-OT): Pakistan Strategy – Aug’21 – Market review and Outlook

Market continued to remain jittery throughout Aug’21, returning 0.6%MoM, as the concerns related to political turmoil in Afghanistan, 4th wave of COVID-19 and rapid currency depreciation (4.4%MoM) spoiled the investors’ sentiments.

Market participation also eased off during the month as ADT clocked in at 523mn (down 11%MoM) while ADTV for the month improved slightly (1%MoM) to clock in at PkR47.4bn.

Foreign selling continued unabated during the month, registering an outflow of ~US$10mn to take the total outflow for CY21 to US$147.2mn. The foreign inflow of US$9.6mn in technology sector was more than offset by selling in Cements (US$5.0mn), Banks (US$2.9mn) and others (US$11.8mn).

The sectors which stood out in terms of monthly performance were Jute (up 40.5%MoM), Textile Weaving (up 25.4%MoM) and Technology (up 5.6%MoM) while the major laggards were Leather (down 7.0%MoM), Tobacco (down 6.8%MoM) and Modarbas (down 4.1%MoM).

The market performance may continue to remain jittery in Sept’21 owing to continued pressure on PKR/US$ parity which had slipped to 167.5/US$ in interbank market at the time of writing. Such rapid depreciation may force SBP’s hand and we may see an earlier than anticipated pick up in interest rates. Currently, we expect 50bps jump in DR by the end of CY21 and a further 25bps jump in 1QCY22.