EUR 8.83 For Business Accounts Only

Stock Smart Weekly (Mar 03, 2023)

StockSmart                            

Weekly Review                                

The local currency depreciated heavily against the USD which lead to a negative sentiment in the market midweek. However, a positive market reaction was seen where the SBP hiked the policy rate by 300bps to fulfil the prior condition of IMF for the long awaited SLA to avert sovereign default and secure the ~$1.2bn disbursement. Furthermore, FX reserves inched up by US$556mn to US$3.81bn as at 24 February, with the import cover remaining below a month. The KSE-100 index closed the week at 41,337pts, depicting an increase of 1.55% over the course of the week. Participation in the market improved, with daily volumes averaging ~159.76mn shares during the week, compared to ~137.89mn shares in the prior week depicting a gain of 15.9%WoW. Other major news flows during the week included: i) Moody's downgrades Pakistan's rating to Caa3; changes outlook to stable from negative, ii) Feb’23 CPI jumps to 31.5%, highest rate in nearly 50 years, iii) $700m Chinese loan lands in SBP account, iv) Jul-Feb trade deficit narrows 33.18% YoY, v) Rs2bn shortfall in Feb’23 tax collection and vi) Money supply reaches to PkR30.68tr in 7MFY23. Sector-wise, the top performing sectors were; i) Miscellaneous (+9.8%WoW), ii) Commercial banks (+3.8%WoW), and iii) Woolen (+2.3%WoW), while the least favorite sectors were; i) Tobacco (-9.2%WoW), ii) Leather and Tanneries (-8.9%WoW) and iii) Property (-6.3%WoW). Stock-wise, top performers were; i) PSEL (+17.3%WoW), ii) UBL (+8.3%WoW), iii) BAFL (+6.7%WoW), iv) EPCL (+6.1%WoW), and v) MEBL (+5.9%WoW), while laggards were; i) PGLC (-20.1%WoW), ii) SML (-14.3%WoW), iii) PAKT (-10.7%WoW), iv) SRVI (-9.2% WoW), and v) JVDC (-8.8%WoW). Flow wise, insurance companies were the major buyers with net buy of US$10.42mn, followed by companies (net buy of US$8.15mn), while foreign investors were major sellers during the week, with a net sell of US$9.48mn.

 

Outlook

All eyes on the Staff Level Agreement, Pakistan is in a very critical situation where delays in the 9th Review can’t be tolerated. Any news flow regarding foreign inflows, whether from the IMF or other bi-lateral and multilateral sources, would support the market. The market may remain jittery in the near future due to higher inflation expected to be driven by hikes in gas tariff and the GST implementation starting to materialize. The Rupee continues its slide against the Greenback, and as the open market rate inches upwards there is no clarity as to its limit. 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