The benchmark index of Pakistan Stock Exchange (PSX) remained range bound during the week ended on 25th June 2021. The investors remained jittery regarding the FATF Plenary meeting which took place from 21st to 25th of this month. Added to this, was uneasiness regarding the ongoing talks with the IMF. The week closed at 47,603 points, down 1.3%WoW.
Automobile Assemblers turned out to be among the outperformers, increasing by 0.28%WoW, led by PSMC as the stock rallied in anticipation of tax incentives offered to cars under 850cc being extended to cars under 1000cc as well. Cable and Electrical Goods sector was also among the outperformers, increasing by 1.19%WoW as ongoing summer season is expected to uplift sales of the sector.
Food and Personal Care products sector increased by 3.07%WoW as government took back the proposal to increase GST on dairy products. Cement sector declined by 3.56%WoW as coal prices remained on upward trajectory, eroding margins.
Major news flow during the week included: 1) Prime Minister Imran Khan categorically stating that Pakistan would ‘absolutely not’ allow any bases and use of its territory for any sort of action inside Afghanistan, 2) Saudi Arabia agreeing to restart oil aid to Pakistan worth at least US$1.5 billion annually in July this year, 3) Pakistan’s trade deficit during the first 11 months (July-May) of the current fiscal year 2020-21 reaching US$27.463 billion as compared to US$21.065 billion for the corresponding period last year, 4) Sui Southern Gas Company (SSGC) announcing that gas supply to non-export industries has been stopped, followed by 50% cut in supply to captive power plants, and 5) Finance Minister saying that IMF has shown flexibility on demands.
To volume leaders included: SILK, WTL, BYCO, HUMNL and TPL. Individuals remained the major buyers with a net buy of US$13.7 million followed by Banks/DFI (net buy US$12.9 million), while Insurance companies emerged net seller with US$12.8 million followed by Mutual Funds (net sell of US$7.35 million).
Ongoing discussions with the IMF regarding continuation of program and approval of Budget FY22 will continue to create noise for the market while FATF maintaining Pakistan on grey list will not have any significant bearing on the performance. Budget FY22 still remains to be passed from parliament and news items regarding Budget will continue to affect sector specific performance. Investors’ focus will also shift towards upcoming result season where analysts expect margin suppression for cyclical plays on the back of increased raw material costs. However, surprises could arise from players maintaining large low cost shares.