EUR 9.12 For Business Accounts Only

Stock Smart Weekly (Feb 17, 2023)

StockSmart Weekly Review The KSE-100 index closed the week at 41,119pts, lower by 623.2 pts or 1.5% over the course of the week. The lackluster performance during the week was despite the Supplementary Finance Bill which was presented to introduce ~PkR170bn in additional taxes—in line with the IMF’s conditions under the 9th review. Furthermore, FX reserves inched up by US$276mn to US$3.2bn during the week, with the import cover remaining below a month’s. As for the currency, the PkR gained ~2.5% of its value against the greenback over the course of the week. Participation in the market declined, with daily volumes averaging ~153.91mn shares during the week, compared to ~284.07mn shares in the prior week depicting a decline of 45.8%WoW. Other major news flows during the week included: i) Tax target raised to Rs7.64trn, ii) Debt, liabilities rise to historical-level of Rs63.9trn, iii) 16.6pc to 124pc hike in gas tariff, iv) Jul-Dec LSMI output down 3.68pc, v) monthly remittances slip below US$2bn, vi) Fitch downgrades Pakistan’s rating citing ‘worsening liquidity, policy risks’, and vii) Car sales plunge 65% in January. Sector-wise, the top performing sectors were; i) Leasing Companies (+20.6%WoW), ii) Leather and tanneries (+3.8%WoW), and iii) Sugar and Allied industries (+3.3%WoW), while the least favorite sectors were; i) Textile Weaving (-8.9%WoW), ii) Tobacco (-8.3%WoW), iii) Miscellaneous (-5.2%WoW), and iv) Pharmaceuticals (-5.0%WoW). Stock-wise, top performers were; i) PGLC (+51.4%WoW), ii) THALL (+9.7%WoW), iii) FABL (+7.0%WoW), iv) JVDC (+6.4%WoW), and v) GHGL (+4.2%WoW), while laggards were; i) PAKT (-9.6%WoW), ii) MUGHAL (-8.4%WoW), iii) KTML (-7.7%WoW), and iv) PSEL (-7.5%WoW. Flow wise, companies were the major buyers with net buy of US$4.12mn, followed by Banks/DFI (net buy of US$2.3mn), while mutual funds were major sellers during the week, with a net sell of US$6.11mn. Outlook Any news regarding a successful Staff Level Agreement with the IMF would lead to euphoria in the market, with the GoP having already introduced the PkR170bn additional taxation measures demanded by the international lender. The market may remain jittery in the near future due to higher inflation readings yet to come, driven by the weakness in the PkR and the effects of the hike in utility tariffs. This has led to expectations of further hikes in interest rates in the country, which has the potential to continue to keep the market range-bound. With this backdrop, we continue to advocate scrips that have dollar-denominated revenue streams to hedge against the currency risk, which include the Technology and E&P sectors. AKD Research