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Stock Smart Weekly (Sep 23, 2022)

StockSmart                       

Weekly Review                           

The market remained under pressure during the outgoing week, driven by renewed weakness in the PkR against the USD and concerns regarding the country’s fiscal health. Participation in the market remained lackluster, with daily volumes averaging ~166.1mn shares during the week, compared to ~183.2mn shares in the prior week. The benchmark KSE-100 Index lost 1,059.28 points during the week, depicting a 2.5% dip in the index. The PkR continued to lose value against the US$, devaluing by 1.2% over the course of the week. Furthermore, the SBP conducted the T-Bill auction this week, where the central bank raised PkR1.3tn against the target of PkR1.5tn. The cut-off yields for the 3M and 12M tenors remained largely flat from the earlier auction, whereas the yield for 6M increased by 15bps to 16%. Other major news flows during the week were; i) Saudi Fund for Development confirmed a one-year extension of $3bn deposit, ii) Initial estimates pointed towards flood losses to be ~US$30bn, iii) IMF announced that it would support Pakistan’s flood relief, reconstruction efforts under the current programme iv) Russia agreed to provide petrol to Pakistan on deferred payments, v) LSMI output was down by 16.5%MoM in Jul’22, vi) SPI was down by 8.11%WoW, and vii) CAD dropped 42% MoM to US$703mn in Aug’22. Sector-wise, the top performing sectors were; i) Tobacco (+5%WoW), ii) and Synthetic & Rayon (+4%WoW), while the least favorite sectors were; i) Close-End Mutual Fund (-10%WoW) and ii) Oil & Gas Exploration Companies (-6%WoW). Stock-wise, top performers were; i) PAKT (+6.3%WoW), ii) IBFL (+5.4%WoW), iii) UNITY (+3.0%WoW), iv) TRG (+1.6%WoW), and v) NESTLE (+0.8%WoW), while laggards were; i) TGL (-14.5%WoW), ii) HGFA (-11.8%WoW), iii) CEPB (-11.3%WoW), iv) KEL (-10.7%WoW), and v) PPL (-10.5%WoW). Flow wise, Foreign investors were the major buyers with net buy of US$5.1mn, followed by Individuals (net buy of US$1.5mn), while Insurance Companies stood on the other side with (net sell of US$3.3mn) followed by Mutual Funds (net sell of US$2.4mn).

 

Outlook

 

Going forward, the easing off in international commodity prices, particularly oil, is expected to be a welcomed development as the pressures on the external account start to recede. On the flip side, the strength in the US$ following the 75bps policy rate increase in the US is expected to put pressure on the exchange rate, which could murk sentiment. Investors will be looking towards any policy action in the upcoming Monetary Policy, scheduled for October 10, 2022. However, the economic slowdown—an intended outcome of the SBP’s contractionary policies—and effects of floods across the country could adversely affect sentiment going forward. We advise clients to stay cautious while building new positions in the market.

 

 AKD Research