The benchmark index of Pakistan Stock Exchange (PSX) closed the week ended on February 17, 2023 at 41,119 points, down by 623 points or 1.5%WoW. Participation in the market declined, with daily trading volume averaging at 153.91 million shares as compared to 284.07 million shares in the earlier week depicting a decline of 45.8%WoW.
The lackluster performance during the week was despite the Supplementary Finance Bill presented to introduce PKR170 billion for mobilizing additional taxes—in line with the IMF’s conditions under the 9th review.
Foreign exchange reserves of the country inched higher by US$276 million to US$3.2 billion during the week, still the import cover remained below one month.
PKR gained 2.5% of its value against the greenback.
Other major news flows during the week included: 1) Tax target raised to PKR7.64 trillion, 2) Debt, liabilities rose to historical-level of PKR63.9 trillion, 3) gas tariff increased by 16.6% to 124% for different types of consumers, 4) July-December 2022 LSMI output declined by 3.68%, 5) monthly remittances slipped below US$2 billion, 6) Fitch downgraded Pakistan rating on worsening liquidity, policy risks, and 7) car sales plunged 65% in January 2023.
Top performing sectors were: Leasing Companies, Leather and tanneries, and Sugar and Allied industries, while the least favorite sectors were: Textile Weaving, Tobacco, Miscellaneous, and Pharmaceuticals.
Stock-wise, top performers were: PGLC, THALL, FABL, JVDC, and GHGL, while laggards were: PAKT, MUGHAL, KTML, and PSEL.
Flow wise, companies were the major buyers with net buy of US$4.12 million, followed by Banks/DFI US$2.3 million, while mutual funds were major sellers, with a net sell of US$6.11 million.
Any news regarding a successful Staff Level Agreement with the IMF would lead to euphoria in the market, with the GoP having already introduced the PKR170 billion additional taxation measures demanded by the international lender.
The market may remain jittery in the near future due to higher inflation readings, weakness in the PKR and the effects of the hike in utility tariffs. This has led to expectations of further hikes in interest rates in the country, which has the potential to continue to keep the market range-bound.
Analysts continue to advocate scrips that have dollar-denominated revenue streams to hedge against the currency risk, which include the Technology and E&P sectors.