Karachi, February 10, 2023 (PPI-OT): Weekly Review

Week stared on a positive note as talks with IMF continued with the delegation that has been in Pakistan since 31st Jan. Overall, investors remained hopeful regarding the meetings with IMF team. For this reason, market remain strong during the first four days of the week with KSE-100 index gaining 1,995 points. Come Friday, market nosedived over the conclusion of talks with IMF team, with KSE-100 losing 725 points on the last trading session of the week. On IMF front, country received MEFP on Thursday with conclusion of the IMF talks in Islamabad, with commitment to impose additional taxation of PkR170bn and cut in untargeted subsidies, as per FM Ishaq Dar.

Overall, KSE-100 gained 1,271 points during the week, depicting a 3.14% increase in the index, settling at 41,742. Participation in the market also witnessed significant improvement with average trading volumes clocking in at 284.07mn shares, compared to 130.78mn in the earlier week, up 117.2%WoW. SBP held FX reserves also fell to meagre US$2.9bn, import cover of less than 3 weeks, stressing on currency resulting in rupee weakened by ~PkR7.3 against the US$, recording a fall of 2.6%WoW to end at PkR268.28/US$ on Friday.

Other major news flows during the week included; 1) PM okays Rs180bn taxes, hike in gas and power tariffs, GST, 2) Indecision on LC issues to lead to petrol crisis by mid-Feb: refineries, 3) First six months: Fiscal deficit swells to 2pc of GDP, 4) Govt hints at withdrawing power subsidy for exporters, 5) Govt raises Rs464bn via MTBs’ sale. Sector-wise, Textile Weaving, Oil and Gas Exploration Companies and Pharmaceuticals were amongst the top performers, up 13.0%/10.2%/9.4%WoW respectively. On the other hand, Leasing Companies, Synthetic and Rayon and Property were amongst the worst performers with a decline of 8.1%/2.2%/2.0%WoW.

Flow wise, major net selling was recorded by Insurance Companies (net sell: US$6.5mn). On the other hand, Individuals absorbed most of the selling with a net buy of US$5.9mn. Company-wise, top performers during the week were, i) OGDC (up 17.6%WoW), ii) TGL (up 15.5%WoW), iii) MUGHAL (up 12.9%WoW), iv) ABOT (up 11.6%WoW), and v) SCBPL (up 10.6%WoW), while top laggards were, i) PGLC (down 16.8%WoW), ii) EFUG (down 7.3%WoW), iii) IBFL (down 5.5%WoW), iv) HUBC (down 4.4%WoW), and v) JVDC (down 4.0%WoW).

Outlook

All eyes are on the IMF staff-level agreement, with the positive news from IMF subsequently unlocking foreign inflows. Improvement in the reserves will be a big relief as LC’s restrictions would expectedly ease off. Even though there may be respite in the short term on the back of IMF’s EFF rollback, we advise out investors to remain cautious as the inflation levels may hit north of 30% in the coming months. Therefore, we continue to advise a cautious approach while building positions in the market.