Karachi, May 19, 2023 (PPI-OT): Weekly Review
Market remained volatile throughout the week. The week started off on a positive note, as the unrest in the country seemed to have subsided after the release of Imran Khan. While as the week progressed, news that Pakistan was planning to abandon the IMF's 9th review created uncertainty in the market, leading to two negative sessions during the week. The KSE-100 index gained 112 points during the week, closing at 41,599 points, a gain of 0.27% from the previous week. Participation in the market also witnessed a decline of 2.3%WoW, with volumes averaging at 130.5mn shares compared to 133.5mn shares in the previous week.
Furthermore, on the fiscal front, country posted a Current Account surplus in the outgoing month to the tune of US$18mn. However, the number was lower than expected due to a decline in remittances (down 13% MoM) and FDI inflows. Moreover, SBP-held FX reserves witnessed a decline of PkR72mn to stand at US$4.3bn as on May 12. Rupee also depreciated by PkR0.74 to close at PkR285.8/US$ on Friday, depicting a decline of 0.26%WoW. Other major news flows during the week included; 1) Jul-Mar LSMI output declines 8.11pc YoY, 2) Govt debt stocks soar to record Rs57trn by Mar-end: SBP, 3) Debt servicing may consume Rs7.6tr, 4) Oil imports decline 48 percent in April, 5) RDA inflows cross $6bn mark in April, 6) May-July: govt intends to borrow record Rs9.4trn. Sector-wise, Exchange Traded Funds, Miscellaneous, and Tobacco were amongst the top performers, up 46.6%/10.5%/6.4%WoW respectively.
On the other hand, Close-end Mutual Fund, Woollen, and Leasing Companies were amongst the worst performers with a decline of 7.0%/6.6%/4.6%WoW. Flow wise, major net selling was recorded by Mutual Funds with a net sell of US$1.5mn. On the other hand, Insurance companies absorbed most of the selling with a net buy of US$4.0mn. Company-wise, top performers during the week were, i) PSEL (up 21.8%WoW), ii) AIRLINK (up 16.1%WoW), iii) SRVI (up 14.2%WoW), iv) NESTLE (up 10.6%WoW), and v) LOTCHEM (up 9.4%WoW), while top laggards were, i) PGLC (down 12.3%WoW), ii) BNWM (down 6.6%WoW), iii) PIOC (down 4.4%WoW), iv) BAHL (down 4.4%WoW), and v) TRG (down 3.9%WoW).
Outlook
Going forwards, positive development towards political stability would instill the investor’s confidence. However, market upside is expected to remain limited due to record high interest rates along with a decline in economic activity (9MFY23 LSMI down 8.1%YoY) and rampant inflation (April CPI 36.4%). We advise investors to take a cautious approach while building positions in the market and we continue to advocate the stocks with dollar-denominated revenue streams (Technology and E and P sector), to hedge against the currency risks or companies with healthy forward dividend yields.