Karachi, June 17, 2022 (PPI-OT): Weekly Review

Announcement of federal budget FY23 saw some sort of stability return to the market after GoP delivered on many of the IMF’s preconditions. The index returned ~0.3%WoW, however, it did recover sharply after shedding 1,135 points (or ~3%DoD) during the first trading session of the week. The market participation picked up slightly where the average daily turnover increased 2.6%WoW to ~174.2mn shares. However, the rupee continued to slide down against US$ to close 208.7/US$, depreciating ~3.2%WoW. Consequently, the US$ adjusted return for the week stands at ~-2.9%. SBP also conducted T-bill auction this week where the central bank raised PkR800bn against the target of PkR750bn. The participation remained concentrated in 3M paper while the yields, surprisingly declined 30bps and 55bps during 6M and 12M papers and remained flat in 3M papers.

Other major news flows during the week were; i) Govt. increased prices of POL products by PkR29/ltr (for petrol) and PkR55/ltr (for diesel), ii) Exports up 27..9%; Jul-May imports soar 44.5% , iii) Cement prices increased by PkR50/bag in the north, iv) PkR5/unit relief on electricity consumption was withdrawn and v) SBP’s forex reserves dip below US$9bn. Sector-wise, the top performing sectors were; i) Engineering (+6%WoW), ii) and OMCs (+5%WoW), while the least favourite sectors were; i) Vanaspati and Allied industries (-14%WoW) and ii) Tobacco (-5%WoW). Stock-wise, top performers were; i) MUGHAL (+10.3%WoW), ii) INIL (+10.0%WoW), iii) MLCF (+8.8%WoW), iv) ISL (+8.2%WoW), and v) SNGP (+7.6%WoW), while laggards were; i) SCBPL (-24.6%WoW), ii) POML (-18.7%WoW), iii) IGIHL (-6.5%WoW), iv) MEBL (-5.6%WoW), and v) UBL (-4.8%WoW). Flow-wise, Insurance companies remained the net sellers, offloading US$5.9mn followed by Brokers (US$-4.4mn). While Individuals and Companies were on the buying side, with a net buy of US$16.1mn. Foreigners recorded a net outflow of US$1.9mn.

Outlook

The rumour mill was in full swing throughout Friday that Pakistan will finally exit FATF’s grey list, however, nothing concrete has come off that till the time of writing this report. However, the chances are bright that the country will finally exit the grey list having achieved compliance on all the major checkpoints. However, before the country exits the grey list, an FATF team will likely visit the country to confirm the implementation. However, the market will likely take this news favourably and we may see market participation picking up. Also, the yields on the government papers look to have plateaued at current levels which will also help bring confidence in the market. However, the country still needs to close an agreement with IMF for the disbursement of US$1bn tranche which will help bring stability to PkR and the index.