Karachi, August 25, 2023 (PPI-OT): StockSmart
The week remained lackluster, with the KSE100 index losing 547 points, closing at 47,671 points. The anticipation of heightened inflation had a negative impact on the market, fearing an ad-hoc policy rate hike. However, the recent T-bill auction negated that sentiment, with yields largely maintaining their flat trend compared to the previous auction. Withal, the focus would be on next month's CPI data and the upcoming MPC meeting scheduled for September 14th. Nonetheless, owing to a week full of result announcements, market participation witnessed a gain of 23.5%WoW, with traded volume averaging at 206mn shares, compared to the previous month's avg of 167mn shares. The week began with the current account shifting from a four-month streak of surplus to a deficit of US$809mn, mainly attributable to an increase in imports (up 33%MoM) and worker remittances (down 15%MoM) during the month.
Moreover, SBP-held Fx reserves fell by US$125mn on a weekly basis to presently stand at US$7.9bn as of August 18th. Additionally, due to import pressures and dividend repatriations, rupee experienced a depreciation of ~1.74% WoW, closing at PkR301 against the greenback. Furthermore, throughout the trading week, the gap between the interbank and open market exchange rates remained ~4-5%. According to the IMF agreement, this gap should not be ±1.25% for 5 consecutive days. Other major news flows during the week included; 1) $2.89bn borrowed from multiple financing sources in July, 2) Preparation of quarterly national accounts: Revised GDP growth under PDM govt may turn out to be over negative 1pc, 3) Quarterly adjustment thru power tariff hike, 4) Banking sector spread decreases by 64bps MoM in July, 5) Power generation up 5pc in July, cost down 22pc, 6) RDA inflows hit $6.487bn, but face headwinds from global rates, 7) Election not possible before May 2024. Sector-wise, Synthetic and Rayon, Textile Weaving, and REIT were amongst the top performers, up 3.0%/1.6%/1.3%WoW respectively.
On the other hand, Cable and Electrical Goods, Pharmaceuticals, and Inv. banks/ Inv. cos./ Securities cos. were amongst the worst performers with a decline of 7.3%/5.3%/4.8%WoW. Flow-wise, major net selling was recorded by Individuals with a net sell of US$8.2mn. On the other hand, Insurance absorbed the selling with a net buy of US$19.0mn. Company-wise, top performers during the week were, i) SCBPL (up 19.6%WoW), ii) HMB (up 13.4%WoW), iii) IBFL (up 5.7%WoW), iv) BAFL (up 4.6%WoW), and v) MARI (up 2.5%WoW), while top laggards were, i) AGP (down 11.1%WoW), ii) PSX (down 11.1%WoW), iii) GADT (down 10.2%WoW), iv) PAEL (down 8.8%WoW), and v) FABL (down 8.6%WoW).
Outlook
Market is expected to sustain a positive outlook, driven by a series of favorable developments with talks being commenced between the IMF and the caretaker government and the confidence of bilateral partners. Given the ongoing trend of significant currency devaluation, we recommend investors to consider investing in companies with revenue in dollars (Tech and E and Ps). Another viable approach is to focus on companies that offer healthy dividend yields or companies with strong valuations.