Karachi, April 08, 2022 (PPI-OT): Weekly Review

Country was thrown in a political turmoil after Prime Minister Imran Khan had recommended the President to dissolve the national assembly after the deputy speaker of the house had judged the notion of no confidence against the PM as unconstitutional amid foreign medaling in country’s politics. Resultantly, the market went into a meltdown, losing ~1400 points in four trading sessions. Rapidly depreciating PkR didn’t help the cause which lost nearly 2.2% in value against the Greenback between Monday and Thursday. However, after a week of uncertainty, country’s apex court took finally gave its verdict, effectively reversing the deputy speaker’s decision.

Also, the rapid currency depreciation forced SBP to intervene and the central bank bumped up the discount rate by 250bps in an emergency meeting yesterday, to stem the further decline in currency value. Resultantly, the currency made a sharp recovery on Friday, appreciating by 1.9% on Friday while the market also posted a robust comeback, closing the week at 44,444 points level (down 1.6%WoW). Participation was very limited throughout the week averaging around 153mn shares, down 50%WoW.

Other major news flows during the week are, i) Foreign exchange reserves falling to ~US$11bn, ii) Major auto assembler stopping booking for new cars, iii) SBP increasing cash margin to 100pc for 177 items, iv) Public debt swells 10.5pc to Rs42.761tn in July-Feb and v) Textile exporting hitting all time high levels US$14.3bn. Sector wise, Vanaspati and Allied Industries topped the performance chart, yielding 4.5%WoW, followed by Chemicals (+3.2%WoW) while Engineering (-7.9%WoW) and Textile Weaving (-6.8%WoW) and Cements (-6.0%WoW) were the major laggards during the week.

Flow wise, Foreigners sold US$3.78mn (net) with the most being in Commercial Banks (US$3.8mn), along with mutual funds (net sell: US$12.4mn) which was absorbed by Individuals (net buy: US$14.8mn) and Banks (net buy: US$4.5mn). Top performing stocks for the week were, i) EPCL (+10.4%WoW), ii) PAEL (+5.1%WoW), iii) COLG (+4.5%WoW), iv) JSCL (+4.5%WoW), and v) OLPL (+4.3%WoW), while laggards were, i) DGKC (down 11.3%WoW), ii) ISL (down 10.8%WoW), iii) IGIHL (down 10.7%WoW), iv) HINOON (down 10.0%WoW), and v) SCBPL (down 9.5%WoW).

Outlook

With political uncertainty now clear, the market will likely remain buoyant over the next couple of trading sessions before the reality of higher interest rates and fluid economic situation again start to settle in. Also, the market participation during the ramazan season may continue to remain limited, however commencing of result season could bring investor interest in specific stocks. We continue to advise investors for building long-term positions, limiting short-term trading. Techs (SYS, AVN), Banks (MEBL, MCB, UBL, HBL), and Textiles (NCL, ILP and GATM).