Karachi, May 12, 2023 (PPI-OT): Weekly Review

In a week mired with political uncertainty, the country presently needs additional financing for the successful completion of long standing 9th IMF review whereas Pakistan has assured the IMF it will not implement cross fuel subsidy programmer. Furthermore, SBP FX reserves fell by US$74mn to US$4.38bn as at 05 May 2023, with the import cover still remaining below a month. The KSE-100 index closed the week at 41,488pts, depicting a decline of 1.79% over the course of the week.

Participation in the market declined, with daily volumes averaging ~133.52mn shares during the week, compared to ~244.47mn shares in the prior week depicting a loss of 45.4%WoW. Other major news flows during the week included: i) Fiscal deficit for Jul-Mar reaches 3.7pc of GDP, ii) Govt raises Rs62.9bn via PIBs, iii) July-April remittances decline 13pc to $22.74bn YoY, iv) Rupee plunges 5.38 against dollar to fresh low and v) Discos seek Rs1.5 per unit QTA for Q3.

Sector-wise, the top performing sectors were; i) Close- End Mutual fund (+3.4%WoW), ii) Textile composite (+2.5%WoW), and iii) Textile Weaving (+1.6%WoW), while the least favourite sectors were; i) Vanaspati and Allied Industries (-7.3%WoW), ii) Oil and Gas exploration companies (-5.6%WoW) and iii) Moradabad (-4.8%WoW). Stock-wise, top performers were; i) GLAXO (+7.1%WoW), ii) SCBPL (+5.9%WoW), iii) MUREB (+5.0%WoW), iv) PIOC(+4.4%WoW), and v) ATLH (+2.5%WoW), while laggards were; i) PSEL (-7.3%WoW), ii) OGDC (-7.3%WoW), iii) PPL (-6.6%WoW), iv) SRVI (-6.5% WoW), and v) HCAR (-6.4%WoW). Flow wise, individuals were the major buyers with net buy of US$1.07mn, followed by Broker Propriety trading (net buy of US$0.85mn), while foreign investors were major sellers during the week, with a net sell of US$1.14mn.

Outlook

Pakistan is in very a critical situation whereas further delays can’t be tolerated. World Bank along with AIIB has linked approval of $700mn loan with the completion of pending IMF review and a move towards political stability will dictate the market performance in the near term. In addition to this, Finance ministry has clarified that arrangements have been made for the rollover/ repayment of $3.7bn debt which are due at the end of FY23. Therefore, in terms of sectoral picks, we continue to advocate companies that have dollar-denominated revenue streams, while minimal dollar-denominated cost structures, which hedges them against any currency risk - the top of our list includes the Technology and E and P sector.