Karachi, March 24, 2023 (PPI-OT): Weekly Review

KSE 100 index started the week on a positive note with expectation regarding developments from IMF. However, IMF has set forth another condition regarding written assurances from friendly countries to fund balance of payment gap before the SLA. Furthermore, Pakistan received loan tranche of $500mn from ICBC bank which brings total commercial loans to $1bn out of committed $1.3bn. Moreover, China has also granted rollover of $2bn of Chinese SAFE deposits for a year. The KSE-100 index closed the week at 39,942pts, lower by 3.36% over the course of the week. Participation in the market declined, with daily volumes averaging ~133.37mn shares during the week, compared to ~223.02mn shares in the prior week depicting a loss of 40.2%WoW.

Other major news flows during the week included: i) FDI drops to $100.9mn, ii) Pakistan’s current account deficit clocks in at meagre $0.07bn in February, iii) $7.407bn borrowed from multiple financing sources in 8 months, iv) T-bills Cut-off yields soar to 22%, v) REER index hits all-time low of 86.4 in February, and vi) Jul-Feb textile group exports dip 11.09pc YoY. Sector-wise, the top performing sectors were; i) Textile weaving (+1.9%WoW), ii) Sugar and Allied industries (+1.5%WoW), and iii) Leather and Tanneries (+0.7%WoW), while the least favourite sectors were; i) Miscellaneous (-15.3%WoW), ii) Vanaspati and Allied industries (-7.1%WoW), and iii) Tobacco (-6.1%WoW).

Stock-wise, top performers were; i) FHAM (+7%WoW), ii) SRVI (+4.9%WoW), iii) SML (+3.1%WoW), iv) RMPL (+2.2%WoW), and v) ATLH (+1.9%WoW), while laggards were; i) PSEL (-26.7%WoW), ii) AKBL (-13.1%WoW), iii) PSMC (-12.4%WoW), iv) DGKC (-10.3%WoW), and v) MUGHAL (-9.9%WoW). Flow wise, companies were the major buyers with net buy of US$1.74mn, while insurance companies were major sellers during the week, with a net sell of US$0.66mn followed by individuals with a net sell of US$0.55mn.

Outlook

Any further development on IMF is likely to determine the direction of the market. Furthermore, newsflow has indicated that the IMF has pushed for a 200bps hike in interest rates in the country, when the MPC meets next on Apr 4, 2023. This has the potential of keeping the market range bound. Furthermore, the country’s external debt servicing requirements stands at $3bn for the last quarter of the current fiscal year which would put the country’s reserve positions in a precarious position with FX reserves with the SBP currently standing at $4.32bn, corresponding to import cover of less than a month. Therefore, with the possibility of further weakness in the PkR, 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.