EUR 8.82 For Business Accounts Only

Stock Smart Weekly (Dec 09, 2022)

Weekly Review

Economic uncertainty regarding Pakistan’s ability to make good on its debt payments kept the market under pressure, with the KSE-100 index dropping by 1.07%WoW to end the week at 41,698pts. Furthermore, SBP confirmed the payment of $1.08bn of International Sukuk last week. This, in turn, brought our FX reserves held by the SBP down to US$6.7bn on December 2, 2022, down by US$784mn compared to the earlier week. Additionally, Saudi Arabia has provided a much-needed breathing space to Pakistan by announcing the rollover of US$3bn which would help meet external sector challenges and achieve economic growth. Participation in the market improved, however negligibly, with average traded volumes increasing from 161.8mn shares in the earlier week to 179.7mn shares this week. Other major news flows during the week were; i) Ecnec okays Rs333.6bn for flood-hit projects, ii) Govt plans to borrow Rs5.52tr domestic debt in Dec-Feb, iii) Govt debt stocks hit historic high of Rs50.152trn, iv) New estimates place flood losses at $46bn, v) Tractor sales may decline 67pc, vi) Auto financing drops for fourth consecutive month, vii) Total Cement dispatches Declined by 17 percent YoY in Nov’22 and viii) Cotton arrivals plunge 40 percent on water crisis Sector-wise, the top performing sectors were; i) Miscellaneous (+10.7%WoW), ii) Closed end mutual funds (+4.2%WoW), and iii) Vanaspati and Allied Industries (-0.2%WoW), while the least favorite sectors were; i) Pharmaceuticals (-5.9%WoW), ii) Jute (-4.4%WoW) and iii) Leasing companies (-3.9%WoW). Stock-wise, top performers were; i) PSEL (+30.8%WoW), ii) PGLC (+7.3%WoW), iii) MUREB (+5%WoW), iv) ILP (+3.5%WoW), and v) BAHL (+3%WoW), while laggards were; i) GLAXO (-11.2%WoW), ii) PIOC (-8.0%WoW), iii) CHCC (-7.9%WoW), iv) PSMC (-7.7%WoW), and v) SEARL (-7.2%WoW). Flow wise, Individuals were major buyers with net buy of US$8.82mn, followed by insurance companies with net buy of US$1.26mn, while foreign investors were major sellers during the week, with a net sell of US$6.26mn. Mutual funds continued to be a seller, with a net sell of US$3.71mn during the week.

Outlook

The market is expected to remain range-bound in the near future, clouded by liquidity concerns of the country, with the SBP FX reserves position having reached US$6.7bn—corresponding to a less than one month import cover. Some respite may come in the form of Saudi Arabia’s expected US$4.2bn (US$3bn in deposits and US$1.2bn in deferred oil facilities), alleviating the pressures off the country’s FX reserves to some extent. Furthermore, the political uncertainty and any developments regarding the 9th review by the IMF would remain in the limelight. Keeping this in view, we prefer IT stocks and advice clients to stay cautious while building new positions in the market.