Karachi, November 19, 2021 (PPI-OT): Weekly Review

Positive news-flow regarding the revival of IMF program kept the sentiments buoyant and the index gained 1.62%WoW to close in at 46,489 level. During the week, the sitting government successfully passed the SBP autonomy bill which was one of the requirements by IMF. This news received a warm reception from the investor community and the index rallied by ~700points in the immediate aftermath. Consequently, the market has yielded –2% since the start of FY22 after this week’s positive performance. However, the week’s positive performance was achieved amid considerably lower market participation which remained dull throughout the week with average daily traded volume standing at 244mn shares against 316mn shares witnessed during last week, down 23%WoW.

Also, after the close of the last trading session of the week, SBP announced its MPS decision where the benchmark interest rates were increased by 150bps as against our and street consensus of 100bps. Higher than anticipated hike in DR may dent investors’ confidence and market may take a beating on Monday. During the week, SBP also announced country’s CA performance for the month of Oct’21 where CAD ballooned to US$1.7bn from US$1.13bn last month.

Cumulatively, this took 4MFY21 CAD to over US$5.0bn. Other major news during the week were, i) Country’s LSM index grew by 1.2%YoY during Sept’21 (1QFY22: 5.2%YoY), ii) Auto financing jumped 44%YoY to PkR346bn, iii) Cotton production jumped 70%YoY to 6.8mn bales, iv) FDI inflow declined 12%YoY during 4MFY22 to US$662mn, v) ECC approved to pay IPPs PkR135bn in second installment and vi) Debt-to-GDP ratio declining 4%YoY during FY21 despite COVID-19. Flow wise, Insurance companies remained the major buyers with (net buy of US$13.5mn) followed by Companies (net buy of US$7.7mn) while Foreigners stood on the other side with (net sell of US$24.9mn) followed by Banks (net sell of US$3.5mn). Stock wise, major performers were, i) SFL (+37%WoW), ii) FATIMA (+11.4%WoW), iii) KAPCO (+9.1%WoW), iv) SHFA (+8.5%WoW) and MLCF (+8.1%WoW), while laggards were, i) MUREB (-7.1%WoW), ii) PSX (- 8.3%WoW), iii) UNITY (-9.1%WoW), iv) GATI (- 14.8%WoW), and v) TRG (- 16.7%WoW).

Outlook

Market is expected to come under pressure after SBP increased the benchmark interest rates by 150bps against the general consensus of 100bps. Also, the news of CAD deteriorating to US$1.7bn will likely create further volatility in the market. Finally, the selling pressure generally seen during the roll-over week will only add further fuel to the fire. As a result of the aforesaid factors, the next week’s performance will likely disappoint where we may see index again testing the recent lows it posted. However, any announcement of revival of IMF program may lift the doom over the PSX and give market something to cheer.