Equity market performance continued to remain disappointing throughout the last week with index shedding 0.64%WoW to close in at 41,679 points. Market participation however improved on a WoW basis where the average trading volume jumped 32.3%WoW to settle ~233mn shares in the all share index. However, the participation in the KSE-100 index remained dull with ADT averaging less than 94mn shares throughout the week (+46%WoW).
Despite IMF’s approval for a loan of US$1.2bn, the local currency continued to loose ground against US$ during the week, depreciating by ~3.7%WoW to close around 237/US$ in the interbank market. At the same time, the spread between the interbank and the open market continued to grow with US$ touching 249/US$ in the open market. SPI during the week eased off slightly with SPI index sliding by 19bps WoW in the week gone by. Pakistan Bureau of Statistics also released the trade numbers for the month of Aug’22 where the trade deficit widened by 31%MoM to US$3.6bn.
Major news flows during the week were; i) FOREX exchange reserves declined by US$156mn during the week to clock in at US$8.6bn, ii) Fitch solutions downward revised GDP growth estimates of Pakistan for FY23 to 0.2%, iii) SBP raises PkR235bn via PIB auction with yields largely remaining flat, iv) Aug’22 remittances post 8%MoM growth to US$2.7bn, v) Car sales dropped by 50%YoY to 8,890 units in Aug’22. Sector-wise, top performing sectors were; i) Vanaspati & Allied (+3.8%WoW) ii) Technology (+3.6%WoW), iii) Textile Weaving (+2.5%WoW), iv) Leasing (+2.1%WoW), and v) IPPs (+1.8%WoW), while the least favorite sectors were; i) Tobacco (-7.%WoW), ii) Synthetic & Rayon (-5.7%WoW), iii) Textile Spinning (-3.6%WoW), iv) E&Ps (-3.1%WoW), and v) Miscellaneous (-3.1%WoW). Stock-wise, top performers in the KSE-100 were; i) TRG (+23.8%WoW), ii) HGFA (+13.6%WoW), iii) JVDC (+6.1%WoW), iv) ATLH (+5.5%WoW), and v) COLG (+3.9%WoW), while laggards were; i) POL (-13.5%WoW), ii) SHFA (-13.2%WoW), iii) APL (-9.1%WoW), iv) NATF (-7.9%WoW), and v) PAKT (-7.1%WoW). Volume leaders were i) TRG (91.4mn), ii) WTL (63.8mn) and iii) KEL (57.5mn). Flow-wise, Foreigners were the largest buyers with a net buy of US$13.8mn and Banks (US$1.3mn). While Insurance and MFs reported a net sell of US$8.5mn & US$3.6mn.
Market is expected to remain jittery going forward as the local currency is unable to find solid grounds against the Greenback. With anticipation building in the global market of a likely raise in interest rates by US-FED by 50bps to 100bps, the US$ will likely remain strong, which will add to further pressure on PkR. With floods also wreaking havoc on the economic activity and agriculture output, the import bill also remains bloated, which means Sep’22 CAD may also surprise estimates on the higher side.
Finally, political noise will also remain heightened with consensus still not reached on the extension of army chief. Consequently, the market will remain jittery amid low volumes.
We advise clients to stay cautious while building new positions in the market.
Courtesy – AKD Research