The market opened positively after IMF Resident Representative dismissed rumours that Pakistan needs to raise USD 8bn instead of USD 6bn, to finance the external debt repayments. Moreover, political tensions relatively eased after the chaos witnessed a week earlier. Additionally, the price of petrol was reduced by PKR 12/liter while the price of high-speed diesel was reduced by PKR 30/Litre.
During the week, economic numbers released by the authorities showed that the current account posted a surplus of USD 18mn in Apr’23 while LSMI output declined by 8.1% YoY during 9MFY23. Moreover, the government raised PKR 444bn through a T-bill auction. However, SBP-held forex reserves fell by USD 72mn WoW to USD 4.38bn. The PKR depreciated against the USD by PKR 0.74 (-0.26%) on a week-on-week basis, closing the week at 285.8/USD. Overall, the market closed at 41,599 points, up by 112 points (0.3%) on a week-on-week basis.
Sector-wise positive contributions came from i) Fertilizer (146pts), ii) Commercial Banks (64pts), iii) Miscellaneous (40pts), iv) Chemicals (37pts), and v) Automobile Assemblers (21pts). Whereas, the sectors which contributed negatively were i) Cement (84pts), ii) Pharmaceuticals (4pts), iii) Inv. Banks / Inv. Cos. (3pts) iv) E&P’s. (2pts) and Engineering (2pts) Scrip-wise positive contributors were ENGRO (73pts), UBL (66pts), FFC (60pts), POL (39pts), and PSEL (38pts). Meanwhile, scrip-wise negative contribution came from MARI (21pts), PPL (17pts), MEBL (13pts), BAHL (12pts), and SYS (11pts).
Foreigner buying was witnessed during this week, clocking in at USD 0.6mn compared to a net buy of USD 1.1mn last week. Major buying was witnessed in E&P’s (USD 0.7mn) and Commercial Banks (USD 0.7mn). On the local front, selling was reported by Insurance (USD 4.0mn) followed by Mutual Funds (USD 1.5mn). Average volumes arrived at 130.5mn shares (down by 2% WoW) while the average value traded settled at USD 12.1mn (down by 14% WoW).
Other major news: i) Jul-Apr foreign borrowings down 37.7pc to $8.123bn YoY, ii) ECC approves Rs5.57bn TSG for urea subsidy, iii) RDA inflows cross $6bn mark in April, and iv) Jul-Apr ITeS export remittances down 3pc to $2.133bn YoY.
Outlook and Recommendation
Market participants will be closely monitoring the developments on Pakistan’s ninth review of IMF program. Materialisation of any funds and commitment from other countries and the financial institution will help bring the IMF program on track, making the overall sentiment of the market positive. Our preferred stocks are OGDC, PPL, MARI, MCB, FABL, MEBL, BAFL, LUCK, MLCF, FCCL, ENGRO, FFC, HUMNL, HUBC, PSO, and SNGP. The KSE-100 is currently trading at a PER of 3.8x (2023) compared to Asia Pac regional average of 11.1x while offering a dividend yield of ~11.9% versus ~3.0% offered by the region.
Courtesy – AHL Research