Karachi, March 17, 2023 (PPI-OT): Weekly Review

Weekly Review

In a week mired with political uncertainty, the market’s movement remained jittery. Furthermore, the IMF has set forth another condition regarding written assurances from friendly countries to fund balance of payment gap before the SLA. The ICBC has given assurance that it will provide another refinanced US$500mn loan in few days bringing total commercial loans refinanced up to $1.7bn. In addition to this, FX reserves inched by US$18mn to US$4.3bn as at of 10’Mar, culminating to an import cover of less than a month. The KSE-100 index closed the week at 41,330pts, lower by 1.11% over the course of the week. Participation in the market increased, with daily volumes averaging ~223.02mn shares during the week, compared to ~209.24mn shares in the prior week depicting a gain of 6.6%WoW.

Other major news flows during the week included: i) KSA extends $1.2b deferred oil payment facility till Feb 2024, ii) Govt raises Rs26bn via PIBs’ auction, iii) Jul-Jan LSMI output falls 4.40pc YoY, iv) Bank deposits up 15pc YoY to Rs22.9tr in Feb, v) Feb workers’ remittances post 5pc growth MoM and vi) Govt to borrow Rs7tr from banks in three months. Sector-wise, the top performing sectors were; i) Woolen (+7.6%WoW), ii) Glass and Ceramics (+5.7%WoW), and iii) Sugar and Allied industries (+4.8%WoW), while the least favorite sectors were; i) Miscellaneous (-12.6%WoW), ii) Close- End Mutual Fund (-4.4%WoW), and iii) Synthetic and Rayon (-4.0%WoW). Stock-wise, top performers were; i) YOUW (+19.5%WoW), ii) TGL (+11.0%WoW), iii) CEPB (+10.7%WoW), iv) DGKC (+8.9%WoW), and v) BNWM (+7.6%WoW), while laggards were; i) PSEL (-20.0%WoW), ii) NESTLE (-6.9%WoW), iii) FHAM (-6.6%WoW), iv) BAHL (-5.6% WoW), and v) RMPL (-5.4%WoW). Flow wise, individuals were the major buyers with net buy of US$4.23mn, followed by Banks/DFI (net buy of US$1.06mn), while Insurance companies were major sellers during the week, with a net sell of US$2.08mn.

Outlook

Any further development on the IMF front is likely to maneuver the direction of the market. The recorded high inflation of 31.5% YoY in Feb’23 is expected to remain a thorn in the country’s side, driven by hikes in tariffs along with Rupee devaluation. This may lead the market to another hike in upcoming MPC scheduled on 4th April’23. Moreover, the local currency has continued to slide against the dollar with no certainty regarding its limit. With this backdrop, we continue to advocate scrips that have dollar-denominated revenue streams to hedge against the currency risk, which include the Technology and E and P sectors.