Pakistan Stock Exchange benchmark closes week almost flat

Announcement of Federal Budget FY23 by the Government of Pakistan (GoP) brought some stability to the local stock market. There is overwhelming perception that the Budget has been prepared keeping in view the conditionalities of the International Monetary Fund (IMF).

The benchmark index posted a nominal increase of 0.3%WoW. It recovered sharply after shedding 1,135 points on the first trading session of the week.

The market participation picked up slightly where the average daily turnover increased 2.6%WoW to 174.2 million shares.

The rupee continued to slide down against US$ to close 208.7/US$, depreciating 3.2%WoW. Consequently the US$ adjusted return for the week declined by 2.9%.

SBP also conducted T-Bills auction during the week mopping up RKR800 billion against a target of PKR750 billion. The participation remained concentrated in

3-month paper whiles the yields, surprisingly declined by 30bps and 55bps for 6-month and 12-month papers, but remained flat for 3month papers.

Other major news flows during the week included: 1) GoP increased prices of POL products by PKR29/ltr (for petrol and PkKR55/ltr for diesel, 2) Exports up 27.9% during Jul-May and imports soar 44.5% , 3) Cement prices increased by PKR50/bag in the North region, 4) PKR5/unit relief on electricity consumption was withdrawn and 5) SBP’s foreign exchange reserves dipped below US$9 billion.

Sector-wise, the top performing sectors were Engineering (up 6%WoW) and OMCs (up 5%WoW), while the least favorite sectors were: Vanaspati & Allied industries down 14%WoW and Tobacco down 5%WoW.

Stock-wise, top performers included: MUGHAL, INIL, MLCF, ISL and SNGP (+7.6%WoW), while laggards were: SCBPL, POML, IGIHL, MEBL and UBL.

Flow-wise, Insurance companies remained the net sellers, offloading US$5.9 million followed by Brokers (US$-4.4 million). While Individuals and Companies were net the buyers, with a net buy of US$16.1 million. Foreigners recorded a net outflow of US$1.9 million.

The rumor mill was in full swing throughout Friday that Pakistan will finally exit FATF’s grey list. However, nothing concrete has come off that till the time of writing this report. However, the chances were bright that the country will finally exit the grey list having achieved compliance on all the major checkpoints.

However, before the country exits the grey list, an FATF team will likely visit the country to confirm the implementation. The market will likely take this news favorably and we may see market participation picking up. Also, the yields on the government papers look to have plateaued at current levels which will also help bring confidence in the market. The country still needs to close an agreement with IMF for the disbursement of US$ one billion tranche which will help bring stability to PKR and the index.

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