Pakistan Stock Exchange remains volatile

After taking a heavy beating during earlier week on the back of high trade deficit for November 2021, the market took a breather on the first trading session of the week. In the second session the news of assistance from Saudi Arabia provided some relief and the market rallied 1.3% during the session.

However, towards later part of the week, market set its sight on the upcoming monetary policy meeting and remained under pressure on the expectations of an increase in interest rate and depreciating PKR. Overall, the benchmark index KSE-100, closed the week ended on December 10, 2021 at 43,396 points, up 0.4%WoW. Stock wise, major performers included: STJT, TRG, PPL, HASCOL, OGDC, while laggards were: ANL, PIOC, HMM, CHCC and SHFA.

Among sectors, Oil and Gas Exploration remained the top performer on the back of increasing oil prices after it was declared that COVID-19’s new variant, ‘Omicron,’ isn’t as contagious as it was initially assessed to be. Technology sector remained in limelight with the sector almost immune to rupee depreciation and increase in interest rates. Cement and Engineering remained among the worst performers with both the sectors being cyclical in nature and expected to be adversely affected from the increase in interest rates.

Other major news flow during the week included: 1) Cement sales increasing by 7%YoY to 4.82 million tons in November this year, 2) Government abandoning the proposal to ban the import of CBU vehicles and instead imposing a regulatory duty of up to 50% on import of CBUs for a certain time period, 3) NEPRA increasing KE’s tariff by PKR3.8/unit for September 2021 under monthly Fuel Cost Adjustment (FCA) mechanism, and 4) The Fitch Ratings agency anticipating further interest-rate hike for Pakistan. Flow-wise, foreigners emerged net sellers with US$1.0 million along with Mutual Funds (US$4.2 million) which was mainly absorbed by Others (US$3.9 million) and Companies (US$2.1 million).

Market is expected to remain focused on upcoming monetary policy meeting on December 14, 2021 (Tuesday). AKD Research anticipates an increase in interest rate of 125-150bps. Any decline in trade deficit/imports for December 2021 will be a sigh of relief for the market. Overall, analysts continue to advocate thematic plays that include Banks (on monetary tightening), Construction (Cements, and Steel), and Textiles (on depreciating PKR and strong export prospects).

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