Karachi, July 29, 2022 (PPI-OT): Weekly Review
In the outgoing week, political turmoil along with concerns regarding the Rupee dominated the market, creating an uncertain environment. Moreover, the current account deficit numbers for June came in at US$2.3bn, up 59%MoM. Amid the fog, the KSE-100 remained flat to close at 40,150pts (+0.2%WoW) while average volume for the index remained low at 150.1mn shares (-8.2%WoW), as investors stayed wary of the market.
Major news flows during the week were; i) Supreme Court overrules the decision of the Deputy Speaker, ii) yields for T-bills remained unchanged in the latest auction, iii) S and P cuts Pakistan’s outlook to negative, iv) Electricity base tariff raised by PkR7.91/kWh, v) Govt. to lift ban on imports except CBUs, vi) SBP-held foreign exchange reserves down $754mn, now standing at $8.58bn, and vii) Fed hikes interest rates by 75bps, bringing target interest rates to 2.25%-2.5%.
Sector-wise, top performing sectors were; i) Vanaspati and Allied industries (+5.4%WoW) ii) Technology and Communication (+4.7%WoW), iii) Textile Composite (+3.8%WoW), iv) Woolen (+3.4%WoW), and v) Textile Weaving (+3.1%WoW), while the least favourite sectors were; i) Automobiles Parts and Accessories (-5.5%WoW), ii) Automobile Assemblers (-5.4%WoW), iii) Fertilizer (-4.0%WoW), iv) Leather and Tanneries (-3.7%WoW), and v) Close-end Mutual Fund (-2.4%WoW). Stock-wise, top performers in the KSE-100 were; i) TRG (+18.1%WoW), ii) FABL (+17.6%WoW), iii) LOTCHEM (+14.2%WoW), iv KEL (+8.6%WoW), and v) APL (+8.1%WoW), while laggards were; i) ATRL (-22.3%WoW), ii) EPCL (-21.1%WoW), iii) CHCC (-20.9%WoW), iv) GATM (-17.1%WoW), and v) NRL (-16.6%WoW).
Flow-wise, Individuals were the largest sellers, offloading US$2.0mn followed by Insurance companies (US$1.8mn), Mutual funds (US$1.2mn), Brokers (US$1.2mn), Foreigners (US$567.3mn), Other organizations (US$65.1mn), and NBFC (US$11.4m). While Banks and Companies were on the buying side, with a net buy of US$3.3mn and US$2.4mn respectively.
Outlook
As the results season continues, all eyes are on the earnings posted by scrips for the previous quarter. After the resolution of political turmoil in Punjab, the political environment of the country seems relatively stable. Record Rupee depreciation, which when added into the mix with inflationary pressures and high interest rates, has created an environment of uncertainty for the market. A recovery in sentiment can be expected once the US$1.2bn tranche from the IMF is released, with the board meeting set to be held near the end of next month. Furthermore, financing can then be expected from World Bank, China, and KSA once IMF gives the green signal, after which the currency is expected to make a strong rebound. Outlook for the market remains hazy for the short-term, and we advise investors to consider any bull run as an exit opportunity.