Pakistan Stock Exchange Benchmark Index Loses 4.8% WoW – OpEd – Eurasia Review

Continued political uncertainty in the country, following the dissolution of the Punjab government and the KP, kept the market under pressure during the week ending January 20, 2023.

The KSE-100 index lost 1,915.5 points or 4.8% to end Friday’s trading session at 38,408.0 points. Volumes dried up, with daily volumes averaging 143.2 million shares compared to 183.3 million shares in the previous week, a 22% WoW decline.

On the currency side, the PKR was down 0.66% to end the week at PKR 229.67/US$.

Other key news of the week included: 1) July-December 2022 remittances fell 11% year-on-year to $14.1 billion, 2) World Bank pledged $615 million for flood relief, 3) E&P firms sounded alarm over impending currency crisis, 4) Barrick Gold plans to start productions at Reko Diq mine in 2028, 5) GoP announces mini-budget of RKR 200 billion to satisfy IMF, 6) July-November 2022 LSMI output drops by 3.58% year-over-year, 7) FDI is down 59% in the first half of the current fiscal year, 8) the current account deficit fell 60% in H1FY23 due to lower imports, and 9) GoP stated its willingness to meet all IMF requirements to revive the lending program.

State Bank of Pakistan (SBP) reserves showed a WoW increase for the first time in about 8 weeks, rising from US$258 million to US$4.6 billion, equivalent to less than 1 month of import coverage.

Sector-wise, the best performing sectors were: Modarabas, Leasing Companies and Insurance, while the least favored sectors were: Cement, Leather & Tanneries and Cable & Electrical Goods.

In terms of stocks, the best performing companies were: EFUG, DCR, FFC, COLG and ABL, while laggards were: KTML, CHCC, KOHC, CEPB and TGL.

Foreign investors were the top buyers with a net purchase of $4.88 million, followed by banks/DFIs with a net purchase of $4.07 million.

Mutual funds were big sellers, with net sales of $9.64 million, followed by insurance companies with net sales of $4.96 million.

The market trajectory next week would be determined by the decision of the Monetary Policy Committee, which is scheduled for January 23, 2023. The market largely expects a 100 basis point hike in policy rates. It appears that the market has already priced in the 100 basis point increase, and any deviation in the decision could affect the market.

In addition, the country’s external position would remain under scrutiny, with the delay in resuming the IMF program hurting market sentiment.

The IMF stamp of approval would unlock flows from bilateral and multilateral sources given the country’s alarming reserve position.

The GoP would have to make tough decisions to please the IMF, including additional revenue collections of PKR 200 billion and increases in gas and electricity rates, along with a market-determined exchange rate.

We continue to advocate for companies that have dollar-denominated revenue streams as currency weakness is expected to continue.