Karachi, September 01, 2023 (PPI-OT): Weekly Review
This week KSE-100 index fell by 4.95%, losing 2,358 points and closing at 45,313. NEPRA’s announcement of a national average power tariff hike of ~PkR 4.96 for FY24 was met with strong disapproval and countrywide protests. The business communities and other political parties showed dismay as well and criticized DISCOs over the levied capacity charges on consumers. Moreover, the Finance Division allowed for a massive hike in petrol prices by PkR14.91/18.44, taking Petrol/HSD to PkR305.36/311.84 per litre. After much anticipation of upheaved inflation figures, August’s CPI was announced as 27.4%, giving a source of comfort during a crunch period. Given elevated demand for the greenback, Pak rupee witnessed a free fall worth 1.4%WoW, reaching PkR305.47 against US$ on Friday. Furthermore, towards the week’s end, the gap between the interbank and open market exchange rates remained 7.4%.
According to the IMF agreement, this gap should not be ±1.25% for 5 consecutive days. Moreover, the forex reserves held by SBP fell by $81mn reaching $7.85bn owing to debt repayments and July’s current account deficit can put additional strain on reserves. Cumulatively, these reasons have had a negative impact on the market. To curb the gas sector’s revolving circular debt, Petroleum Ministry is gearing for a 60% increase in gas prices. On the bright side, FBR has provisionally collected PkR1.21tn during first two months of FY24 against a target of PkR1.18tn, reflecting an increase of PkR24bn. Market participation witnessed a loss of 9.1%WoW, with traded volume averaging at 187mn shares, compared to the previous week’s average of 206mn shares. Other major news flows during the week included 1) Foreign investors’ buying in August stands at $12.87mn, 2) PIA seeks PkR23bn bailout from government, 3) CMEC may halt production at Thar coal mines given non-clearance of $50mn.
4) Total tax collected from power sector including electricity bills stood over PkR160bn for FY23, 5) SBP adopts AAOIFI’s Shariah standards, 6) Income tax department levies super tax on non-resident companies in negation of double taxation treaties, 7) DISCOs withdrew up to 41% less power from national grid in 4QFY23, and 8) 8.07mn mobile phones were manufactured by local plants during Jan-July 2023. Sector-wise, Textile weaving was the top performer, indicating an increase of 2.83%. Whereas, close end mutual fund/ power generation and distribution/ automobile parts and accessories were amongst the worst performers with a decline of 15.9%/10.4%/9.84%WoW. Flow-wise, major net selling was recorded by Banks/DFI with a net sell of US$6.26mn.
On the other hand, Insurance companies absorbed the selling with a net buy of US$7.9mn. Company-wise, top performers during the week were, i) SCBPL (up 5.5%WoW), ii) INDU (up 4%WoW), iii) HMB (up 3.7%WoW), iv) AICL (up 3.4%WoW), and v) NRL (up2.3%WoW), while top laggards were, i) HGFA (down 16.4%WoW), ii) DGKC (down 15.8%WoW), iii) NML (down 12.8%WoW), iv) APL (down 12.4%WoW), and v) NCL (down 12.1%WoW).
Going forward, market is in commensuration with outcomes of 1) upcoming MPC meeting on September 14th, 2) ensuing review with IMF in October, and 3) developments encircling energy reforms. In the event of an interest rate hike, cyclical sectors may face turbulence, although market has already adjusted for this impact. We reiterate our stance of following a cautious approach to stock picking and we continue to advocate dollar-denominated revenue stream scrips (Technology and E and P sector) to hedge against currency risk or high dividend yielding scrips.