PSX performances earlier this week and outlook

After losing 1.63%WoW in the previous week, KSE-100 index remained flattish in the outgoing week where investors preferred to stay on the backseat and wait for the SBP amendment bill to pass, the last prior action needed to be complete for the release of US$1bn tranche by IMF. After tabling it in senate this morning, the govt. was able to pass the bill with 43 votes in favor and 42 votes in opposition. Unexpectedly, the market did not react much on this event due to liquidity hitches and the last day of rollover week due to which the market players adopted a cautious approach. The average volumes during the week remained low at 187.4mn, down 6.8%WoW.

Besides the passage of SBP amendment bill, other news flow during the week included; i) SBP keeping the policy rate unchanged at 9.75% and signaling the rate to remain at this level for upcoming MPS as well, ii) T-bill yields contracting 15-68bps, iii) PIB yields contracting 71-79bps, iv) CAD swelling to US$9.1bn in 1HFY22, v) GoP successfully issuing US$1bn Sukuk at 7.95% for a tenor of 7 years, vi) Foreign debt rising by US$9.4bn in 1HFY22, vii) Oil hitting US$90/bbl since CY14, viii) Foreign investors repatriating US$891mn in 1HFY22 and ix) SBP’s FX reserves falling US$846mn in the week ending 21st Jan’22. In addition to this, FFBL and HCAR announced their financial results where the earnings remained below market consensus, putting the scrips under selling pressure while the earnings of LUCK remained broadly in line.

Sector-wise, Closed-End Mutual Funds stood as the top performers with a gain of 6.5%WoW while the Woolen sector (-6.1%WoW) stood as the major underperformer. Stock wise, top gainers were, i) ARPL (+10.0%WoW), ii) BAFL (+7.1%WoW), iii) UNITY (+6.3%WoW), iv) HGFA (+5.2%WoW), and v) ANL (+4.0%WoW) while top laggards were, i) FFBL (-13.5%WoW), ii) BNWM (-6.1%WoW), iii) HCAR (-6.1%WoW), iv) SYS (-5.6%WoW), and v) COLG (-5.6%WoW). Flow-wise, Foreigners stood as net sellers with a sell-off of US$4mn, together with Other Organizations and Individuals with net sell of US$15mn and US$4.4mn respectively. On the other side of the scale, Companies and Mutual Funds were the major buyers with a net buy of US$19.4mn and US$4.7mn respectively.

Outlook

The passage of SBP amendment bill was the last hiccup for the 6th IMF review – passage of which paves way for its success in the upcoming meeting on 2nd Feb’22 which may provide the much needed trigger to the market, inviting the bulls to return to re-rate the extreme low valuations currently. In addition to this, the current result season may also provide another trigger to the market while the latest bull run of Oil raises further concerns on the trade deficit. We expect the market to ignore the oil rally for now as the positive news flows ahead calls for going long in the market.

Courtesy – AKD Research

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