Indecisiveness of coalition government keeps Pakistan market depressed

The week ended on May 20, 2022 started on a bad note with the benchmark index declining by 1.9% on the first trading day as lack of economic direction weighed heavily. Even though the market recovered in later trading sessions, but overall performance remained choppy, lacking clear direction throughout the week. Finally, the market closed the week at 43,101 points, down 0.89%WoW. Average daily trading volume also slipped to 220.8 million shares, from 274.04 million for the earlier week. Overall, political uncertainty and indecisiveness over prerequisites for IMF program resumption put Pakistan’s economic situation into a tailspin leading investors towards risk-averse behavior.

Other important news flows during the week included: 1) Remittances growing strongly by 11.2% to US$3.12 billion in April 2022 as compared to US$2.81 billion for March this year, 2) Large-scale manufacturing (LSM) industries recording 10.4%YoY growth during first nine months of the ongoing fiscal year, 3) Pakistan and the United States resuming their efforts to rebuild bilateral ties with a series of meetings between their foreign policy chiefs in New York, 4) Pakistan and the International Monetary Fund (IMF) commencing review talks in Doha on Wednesday in a renewed effort to strike a staff-level agreement, and 5) Government imposing a ban on the import of 38 non-essential/luxury items. Sector wise, fertilizer sector was among the sectors posting a positive performance as investors moved to high dividend yield stocks. Engineering sector posted a positive performance with an increase of 2.4%WoW. A against this, Cement sector was amongst the worst performers with a decline of 3.1% for the week as coal prices continued the upward trend.

Flow wise, major net selling was recorded by Mutual Funds (US$7.28 million), and foreigners also remained net sellers with US$6.08 million). Banks absorbed most of the selling with net buy of US$11.5 million.

Top performers include: POML, EPCL, HGFA, ASL and PSMC, while top laggards were: SML, TGL, CHCC, ILP and GATM.

Market is likely to remain choppy going forward as a host of economic challenges weigh in on the investor sentiments. Some respite may be provided if the fuel prices are unfrozen in the country which will help the government in its parleys with IMF. However, the downside of the same will be spiraling inflation which will likely cross the 15% in the coming months. Analysts advise the investors to remain cautious.

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