Pakistan Stock Exchange extended its 4th week of losing streak

Investors’ sentiments were dampened by high inflation rate and poor corporate results, as they overlooked numerous positives. The positives included government backed Sadiq Sanjrani’s surprise win in the Senate vote and resumption of military sales from the United States. The benchmark index lost 437 points or 1.36%WoW to close the week ended 2nd August at 31,666 points. Based on NCCPL data, foreigners remained net buyers amounting to US$3.4 million, as against this Mutual Funds emerged net seller of US$4.8 million.

Key news flows impacting the market during the week included: 1) Senate Chairman, Sadiq Sanjrani surviving no-confidence move on Thursday, despite opposition enjoying majority in the upper house, 2) headline inflation for July 2019 hitting a 6-year high of 10.34%YoY as against 8.89%YoY for June 2019 and 5.83%YoY for July last year, 3) US administration resuming US$125 million military sales for Pakistan, practically ending a freeze on military assistance to the country, 4) the GoP planning to issue another PkR200 billion Energy Sukuk in third week of August in a bid to reduce outstanding energy sector’s circular debt, 5) the GoP raising US$500 million through an Islamic syndicated loan provided by a consortium of 12 banks and 6) the GoP working on the new ‘Pakistan Oil Refining and Marketing Policy 2019’, under which it is likely to scrap deemed duty on HSD sale and introduce refinery margins for oil refineries. Top performers of week included APL, FATIMA and POL, while ASTL, HASCOL and EFOODS remained the worst performers.

Positives both on the macro (formal entry into the IMF program, stability in Rupee, tightening cycle nearing its end, fiscal reforms starting to yield results) and on the political front (Imran Khan’s successful visit to the US, Surprise win of the government-backed Chairman Senate’s survival) are hard to ignore. Other strong catalysts include: 1) avoidance of blacklisting in next FATF review, 2) upside earnings surprises though less likely and 3) positive surprises on inflation, CAD and budget deficit numbers have the potential to trigger a rally. However, near term market performance might closely follow result announcements. Major announcements scheduled for next week include UBL, MCB, EFERT, EPCL and AGP.

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