Karachi, February 24, 2023 (PPI-OT): Weekly Review
Market witnessed an overall volatile session with news flows regarding the IMF deal and approval of Financial Supplementary bill for additional taxes of PkR170bn hold up the investor’s confidence. Further agitation amongst the participants increased once T-bill cut-offs in the latest government auction went upto 19.95%, adding further fuel to the fire regarding interest rate hikes. On the external front, SBP reserves also witnessed an increase for second consecutive week to stand at USD$3.26bn, still standing at a critical level and noticeable improvement can be expected after IMF agreement and expected inflows from bi-lateral partners.
The KSE-100 index closed the week at 40,708pts, lower by 411points, depicting a decline of 1.0% over the course of the week. Participation in the market also declined by 10.4%, with daily volumes averaging ~138mn shares during the week vs. avg. of ~154mn shares in the last week. As for the currency, PkR continued to strengthen against the US$, gaining 2.82% over the course of the period to close in at PkR259.99/US$ on Friday. Other major news flows during the week includes; 1) Forex reserves to get much-needed boost: China lends a hand amid IMF procrastination, 2) Govt announces steps to correct fiscal imbalances, 3) Jul-Jan: C/A falls hugely on import curbs to clock in at $3.8 billion deficit, 4) Islamabad gets ‘positive signals’ for help from Riyadh, Beijing, 5) ECP fails to take decision on election date. Sector-wise, Miscellaneous, Cement and Vanaspati and Allied Industries were amongst the top performers, up 6.7%/3.1%/3.0%WoW respectively.
On the other hand, Leasing Companies, Close-End Mutual Fund and Oil and Gas Exploration Companies were amongst the worst performers with a decline of 12.2%/10.9%/5.9%WoW. Flow wise, major net selling was recorded by Individuals with a net sell of US$4.56mn. On the other hand, Companies absorbed most of the selling with a net buy of US$5.91mn. Company-wise, top performers during the week were, i) PSEL (up 12.8%WoW), ii) MLCF (up 11.9%WoW), iii) KTML (up 11.5%WoW), iv) KOHC (up 10.3%WoW), and v) MUGHAL (up 6.6%WoW), while top laggards were, i) PGLC (down 27.8%WoW), ii) HGFA (down 13.2%WoW), iii) PPL (down 11.4%WoW), iv) SHFA (down 10.2%WoW), and v) SHEL (down 9.9%WoW).
Outlook
The market is expected to remain range-bound in the near future, clouded by concerns regarding the interest rate hike. Expected increase in the interest rate may be a huge downside for the aggregate demand and subsequently the equity markets. Any news regarding a successful Staff Level Agreement with the IMF and inflows from bi-lateral partners would aid investor’s confidence. Hence, we advise clients to stay cautious while building new positions in the market.