Outlook
After the downward correction faced by the market this week, we expect it to remain jittery in the near term. As the country settles into the new regime, economic policies are set to change, causing uncertainty in the market until things become clearer.
News from IMF is bound to dictate market sentiments in the near term, with tough conditions being laid out for the country in the ongoing review. The ongoing results season is vital in formulating investment strategies, as best performing scrips are likely to experience gains. We continue to advise investors to accumulate on fundamental scrips with a long-term focus, and prefer the Refineries, Fertilizers and Chemicals sectors.
Past week performance
After the surge, which the market experienced last week based on positive sentiment about the new Government formed by the coalition parties, we have now seen a downward correction. The KSE-100 index has lost 1,049pts this week, down 2.25%WoW to close at 45,553pts. Moreover, the Rupee has depreciated by 2.86%WoW, due to the growing Current Account deficit. Due to uncertainty regarding new economic policies, the market exhibited thin volumes with Average Daily Turnover being 225mn shares, amounting to a decline of 53%WoW.
IMF has laid out certain conditions in the ongoing discussions, with the key conditions being the withdrawal of fuel subsidy, the abolishment of the tax amnesty scheme along with additional tax measures, and an increase in the Power tariff. Miftah Ismail, Minister of Finance has left for US to hold talks with IMF for the ongoing review.
Other major news flows during the week were; i) Bond yields up by 70/60/55bps for the 3m, 6m, and 1y T-bills respectively, ii) Imports for Jul-Mar soar 49%YoY to USD58.9bn, iii) LSM posting a growth of 7.8% during Jul-Feb, iv) Procurement of RLNG cargoes from Qatar for May and June to relieve the gas crisis, v) Government considers raising fuel prices for consumers, and vi) The Cabinet for the new government has been selected.
Sector wise, the biggest gainers were Sugar & Allied and Oil & Gas Exploration, up 2.1%WoW and 2.0%WoW respectively. Tobacco and Leather industries declined the most with both down 6.1%WoW, followed by Paper and Leasing companies down 5.6/5.3%. Stock wise, top performers were; i) LOTCHEM (+18.7%WoW), ii) APL (+7.7%WoW), iii) OGDC (+4.3%WoW), iv) PPL (+3.6%WoW), and v) EPCL (+2.2%WoW), while laggards were, i) CHCC (-10.0%WoW), ii) SRVI (-9%WoW), iii) FCCL (-8.6%WoW), iv) UNITY (-8.4%WoW), and v) MUGHAL (-8.2%WoW). Flow wise, Mutual Funds remained the net sellers offloading USD6.0mn, followed by Banks & DFIs (USD1.2mn), and Insurance companies (USD0.3mn). Foreign investors have continued to sell their positions, with FIPI being a net sell of USD1mn. Individuals and Companies remained on the buying side, with a net buy of USD7.0mn and USD0.9mn respectively.
Courtesy – AKD Research