Karachi, March 18, 2022 (PPI-OT): Weekly Review

Following previous week’s 2.0%WoW decline in KSE-100 index, the market shed another 623pts during the week, mainly during the last 2 sessions. This resulted in 1.43%WoW decline in total market capitalization of KSE-100 index. At the same time, volumes also dried up where only 174mn shares traded daily on average compared to 214mn shares in previous week, declining 18.6%WoW. The market’s downward trajectory has been due to further escalation in country’s political uncertainty as we approach close to 28th March, the day when no confidence vote is due.

Similarly, the uncertainty in global commodity markets continued to persist. Although Oil prices fell below US$100/barrel during the week, the price rebounded back to US$100/barrel which adversely impacted the local market. Other news flow during the week included; i) Beginning of IMF’s 7th review, ii) Govt. keeping the petrol prices unchanged till the next fortnight at a cost of PkR28bn, iii) PkR hitting another low of PkR180/US$, iv) US FED moving up the interest rate needle by 25bps, v) cut off yields on PIBs soaring 115bps, vi) ECC approving PkR24.26 subsidy on DAP fertilizer for upcoming kharif season, vii) banking sector deposits increasing 15%YoY to PkR20trn, and viii) Forex reserves declining 1.7%WoW to US$22.3bn.

Sector-wise, the gains remained small, with the top performing sectors being; i) Leather (+4.4%WoW) ii) Woollen (+3.9%WoW), iii) Sugar (+2.3%WoW), iv) Real Estate (+1.1%WoW), and v) Foods (+0.9%WoW). The least favourite sectors were; i) E and P (-6.4%WoW), ii) Leasing (-5.6%WoW), iii) Closed end Mutual Funds (-4.2%WoW), iv) Refinery (-4.2%WoW), and v) Banks (- 4.2%WoW). Stock-wise, top performers were; i) JSCL (+16.3%WoW), ii) SML (+7.3%WoW), iii) KTML (+4.4%WoW), iv BNWM (+3.9%WoW), and v) NESTLE (+3.5%WoW), while laggards were; i) PPL (-10.5%WoW), ii) TRG (-8.1%WoW), iii) BAFL (-8.0%WoW), iv) SCBPL (-7.9%WoW), and v) AVN (-7.9%WoW). Flow-wise, Foreigners remained as the net sellers, offloading US$4.9mn followed by Individuals (US$3.2mn) and Brokers (US$1.7mn). On the other hand, Banks, Companies, Insurance Companies and Other organizations were on the buying side, with a net buy of US$4.4mn, US$2.9mn, US$2.0mn, and US$1.0mn, respectively.

Outlook

The political uncertainty amidst the no confidence vote will continue to steer the market while the start of rollover week will further add to the volatility. Similarly, the market will watch the movement of global commodities very closely and will react accordingly. Additionally, news flows related to ongoing IMF review would also dictate market sentiments in the coming weeks, warranting a closer look. Hence, we advocate for gradual accumulation in fundamental scrips with a longer-term focus. We prefer Banks (on possible further monetary tightening by the Central Bank), select-Techs (SYS, AVN) and other select-value stocks (LUCK etc.). We also like Fertilizers (FFC and EFERT) on the back of recent hikes in urea prices.