Karachi, June 23, 2023 (PPI-OT): Weekly Review
The outgoing week saw gloomy sentiments overwhelm the local bourse, where the KSE100 index maintained a bearish attitude since the announcement of the budget on June 9th. The benchmark index opened the week at 41,301pts, falling to 40,065pts ((Down)1,236pts, (Down)3.0%WoW). Average traded volumes were 131.0mn compared to 161.7mn shares last week ((Down)19.0%WoW) depicting the lackluster activity. The market’s performance has been characterized by the IMF’s disagreement over the federal budget, aggravated by Pakistan’s non-inclusion in the Fund’s board meetings up till June 29th. Although there are assurances from the Prime minister and other senior officials regarding a positive conclusion to the program, investor sentiments remain unmoved.
Furthermore, SBP held forex reserves have plunged to US$3.5bn, excluding the refinanced US$300mn from China and absence of any bilateral flows owing to the stalled IMF program, exacerbating the already precarious situation when Pakistan has a US$10.35bn debt obligation by the end of 1HFY24. The PkR-US$ parity remained consistent during the week, with the PkR registering mild gains to close at 286.7 ((Up)0.2%WoW). Other major news for the week were; 1) FBR income tax collection was up ~41.0%YoY surpassing the annual target of PkR3,026bn ahead of FY23 close; 2) PkR2.43bn raised in T-Bills auction, at a flattish yield of ~22.0%; 3) C/A surplus of US$225mn was recorded during May ’23, compared to US$78mn in April ’23. 11MFY23 C/A deficit narrowed ~81% over sluggish imports; 4) FDI fell ~21%YoY during 11MFY23 to stand at US$1.32bn.
Total foreign investment nosedived ~82.0%YoY to stand at US$294mn. However, US$149mn inflows were recorded in May ’23, depicting a ~6.0%MoM increase in FDI; 5) External govt. borrowing of US$8.6bn during 11MFY23 declined by ~36.0%YoY. Sector wise, Leasing Companies, Transport, and Glass and Ceramics have been the worst performers, declining by 14.1%/10.5%/8.8% on a weekly basis, whilst Tobacco remained the exception, clocking a 4.8%WoW gain.
Flow-wise, major net selling was recorded by Brokers with a net sell of US$7.7mn. On the other hand, Companies absorbed most of the selling with a net buy of US$10.5mn. Company-wise, top performers during the week were, i) SML ((Up)22.3%WoW), ii) SHEL ((Up)10.1%WoW), iii) PAKT ((Up)6.7% WoW), iv) UPFL ((Up)6.5%WoW), and v) AGP ((Up)6.1%WoW), while top laggards were, i) MTL ((Down)32.8%WoW), ii) PGLC ((Down)21.9%WoW), iii) YOUW ((Down)21.9%WoW), iv) GATM ((Down)21.7% WoW), and v) PSMC ((Down)14.3%WoW).
Outlook
Market is expected to remain rangebound owing to a lack of clarity on the IMF program, stalled bilateral flows amidst a burgeoning debt burden fueling the default risk. We expect the market to react once NA finalizes the Finance Act for FY24, keeping in view proposals put forward by the Senate and other business bodies. 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.