Pakistan Stock Exchange declines 3.6%WoW

The week ended on June 03, 2022 witnessed sluggish movement in the first three days and the market took a hit on Thursday and Friday. The benchmark index, KSE-100 lost 3.6%WoW to close at 41,315 points. Economic uncertainty along with rising interest rates and bond yields kept the sentiments subdued. Average daily trading volume for the Index declined to 10 million shares, posting 25.3%WoW decline.

Major news flows during the week were: 1) GoP increases prices of POL products, 2) Pakistan agrees terms for rollover of US$2.3 billion debt from China, 3) Moody’s changes the outlook for Pakistan to negative, 4) NEPRA hikes base-tariff by Rs7.9/unit, 5) T-Bills yields jump 75bps for 3-months and 12-months tenor and 55bps for 6-m0nth paper, 6) foreign exchange reserves held by the central bank SBP dip below US$10 billion, 7) GoP shocks consumers with R213/liter hike in cooking oil prices, 8) GoP lifts ban on import of raw materials and machinery for industrial sector and 9) Pakistan shut out of international bond markets.

The top performing sectors were: Vanaspati & Allied Industries and Sugar & Allied Industries, while the least favorite sectors were: Automobiles parts & accessories, Engineering, Leasing companies, Woolen and Cement.

Stock-wise, top performers included: POML, SCBPL, ABOT, COLG and ABL, while laggards were: TGL, THALL, CHCC, PGLC and PSX.

Flow-wise, Insurance companies remained the net sellers, offloading US$7.8 million followed by Mutual Funds with US$4.1 million). Individuals and Companies were on the buying side, with a net buy of US$5.6mn.

With T-Bills yields rising and amid political uncertainty, the market remained in a state of indecisiveness. Incoming news regarding IMF is bound to remove some of the gloom, but the longer it is delayed the more the uncertainty is going to influence the market. The local currency has started paring some of the losses it has made recently, appreciating to Rs198/US$ at the time of writing, with fresh inflows likely to materialize once the IMF deal is closed. With rising interest rates and the GoP removing subsidies from POL products, overall market outlook remains uncertain at best as analysts await news from IMF. They retain their liking for Refineries and IT sector in the current backdrop and advocate for gradual accumulation in fundamental scrips with a longer term focus.

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