Pakistan Stock Exchange (PSX) took a breather this past week ended August 19, 2022. The benchmark KSE-100 index closed the week at 43,271 points, up 0.96%WoW. The week started on a promising note as KSE-100 index gained 764 points on the first trading session backed by improving exchange parity, news regarding monetary help coming from friendly countries such as Saudi Arabia, and impressive earnings posted by refineries and other sectors boosting investor’s confidence.
The average daily trading volume for the index showed impressive growth, backed by boosting investors’ confidence and expectation that the IMF program will finally come into place after its Executive Board meeting scheduled to be held on August 2022, propelled average volumes to 519 million shares (51.4%WoW), as investors showed robust optimism.
Major news flows during the week were: 1) GoP decided to present a mini-budget and lift ban on the import of luxury and non-essential items in compliance with IMF conditions, 2) SBP foreign exchange reserves increased by US$67 million to US$$7.9 billion, 3) the GoP announced an intension to borrow PKR6.8 trillion from commercial banks over two months – August and September 2022, mainly to repay previous loans and to finance its budget deficit, 4) Pakistan’s services trade deficit widened 106% to US$5.2 billion in FY22 from US$$2.5 billion a year ago, 5) Petroleum levy likely to increase to PKR50/liter and 6) Pakistan may seek a 15-year LNG contract with Qatar on a G2G (government to government) basis.
Stock-wise, top performers in the KSE100 were: HGFA, UNITY, PGLC, KEL and SML, while laggards were: PSMC, HCAR, NBP, PSEL and INDU. Flow-wise, Insurance was the largest seller, offloading US$4.5 million followed by Banks and DFI (US$2.5 million). While Broker Proprietary Trading and Companies were on the buying side, with a net buy of US$7.2 million and US$2.5 million respectively.
State Bank of Pakistan (SBP) is scheduled to announce Monetary Policy on coming Monday. Analysts expect the policy rate to be raised by 50 to 100 bps. The decision is likely to drive the market’s momentum in the coming week. As the results season continues, all eyes are on the earnings posted by scrips for the previous quarter. The market momentum is likely to remain positive as Pakistan inches closer to release of the IMF tranche of US$1.2 billion.
The currency market will also likely carry its current trajectory and PKR may gain further ground against the Greenback. Brokerage houses hint Tech and Refineries sectors to outperform in the short run. Investors are advised to closely track the result announcements and can build positions accordingly.