Outlook
The Pakistan stock market will remain choppy as a host of economic challenges weigh in on the investor sentiments. Some respite may be provided if the fuel prices are unfrozen in the country, which will help the government in its discussions with IMF. However, the downside of the same will be spiralling inflation which will likely cross the 15% in the coming months.
Past week
Political uncertainty and indecisiveness over prerequisites for IMF program resumption have put Pakistan’s economic situation into a tailspin leading investors towards risk-averse behaviour. The first full working week in May’22 stands no different than the latter half of Apr’22 for equities where the KSE-100 index returned –ve 3.0%WoW to close at 43,486pts. The index continues to hold the all-important technical level of 42,700pts. PkR has depreciated 3.4%WoW against US$, standing at an all-time low of PkR192.9/US$ while FX reserves deplete to US$10.3bn, signifying an import cover of ~1.5months.
Other important news flows during the week were, i) US Secretary of State Antony Blinken inviting Pakistan Foreign Minister to a meeting in Newyork – the first formal meeting with US Govt. officials with Pakistan counterparts since Sep’21, ii) 10MFY22 trade deficit widening by 65%YoY to stand at US$39.3bn with Apr’22 deficit standing at US$3.7bn, iii) Pakistan reporting the first case of Omicron sub-variant, iv) Saudi Arabia tying US$3bn additional deposits with IMF program revival, v) RDA flows hitting US$4.2bn mark, vi) NSS revising profit rates by 0.96-3.0% across all schemes, vii) cement sales down 28%YoY in Apr’22, and viii) auto sales dropped 18%YoY in Apr’22.
Sectors that exhibited outperformance during the week include Chemicals (outperformance: 2.0%) and E&Ps (outperformance: 1.6%). Sectorwise, amongst mainboards, Engineering and Cement sector posted the largest decline of 6.1%WoW and 5.9%WoW respectively, owing to concerns over a potential slowdown in demand and margin shrinkage. In contrast, overall, Cable & Electrical goods segment and Vanaspati & Allied industries recorded a decline of 7.7%WoW each.
Flow wise, major net selling was recorded by Individuals (net sell: US$10.4mn), and mutual funds (net sell: US$3.2mn), as a result falling in the same boat as foreigners (net sell: US$1.9mn). On the other hand, Banks absorbed most of the selling with net buy of US$16.3mn. Stock wise, top performers include, i) HMM (+25.7%WoW), ii) SERT (+17.0%WoW), iii) SML (+9.6%WoW), iv) COLG (+8.1%WoW), and v) PSEL (+8.1%WoW), while top laggards were, i) MTL (down 14.4%WoW), ii) PAEL (down 11.1%WoW), iii) AVN (down 10.2%WoW), iv) CNERGY (down 10.1%WoW), and v) ANL (down 9.9%WoW).
Courtesy- AKD Research