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Stocks to take cue from fiscal situation

456351 093217 updates

A stockbroker talks on the phone as he is reflected on a window pane along with a trading screen.— Reuters/File
A stockbroker talks on the phone as he is reflected on a window pane along with a trading screen.— Reuters/File
  • PSX loses 787 points or 1.8% week-on-week.
  • Market expected to remain range-bound next week.
  • Saudi inflows may provide some fiscal breathing space.

Stocks are mostly seen treading water down the line as triggers for generating sustainable forward momentum remain elusive amid concerns over foreign exchange reserves ahead of major international debt servicing.

Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index closed the week at 42,150 points after shedding 787 points or 1.8% compared to the last weekly closing.

Average volumes clocked in at 162 million shares, up 1% week-on-week, while average value traded settled at $24 million, down 7% week-on-week.

“We expect the market to remain range bound,” Arif Habib Limited, a brokerage house, said in its weekly market report.

It said the extension in the term of the Saudi Fund for Development (SFD) worth $3 billion would provide a breather to the concerns regarding external repayments.

Saudi Arabia deposited the money in the State Bank of Pakistan (SBP) late last year as a loan to shore up the cash-strapped country’s reserves.

“We do highlight that Pakistan’s International Sukuk is maturing on December 5, 2022; however, as per SBP, funding against this has already been arranged,” the Arif Habib report said.

The KSE-100 is currently trading at a PER of 4.1x (2023) compared to the Asia Pac regional average of 12.9x while offering a dividend yield of ~10.2% versus ~2.8% offered by the region.

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During the week

The market commenced the week on a negative note amid a surprise policy rate hike by the SBP (+100 basis points to 16%) last Friday coupled with political noise, with the index losing 973 points during the intraday.

The momentum briefly turned positive after the SBP received $500 million from Asian Infrastructure Investment Bank (AIIB).

With this, the rupee appreciated during the week against the greenback, gaining Rs0.25 or 0.11% week-on-week to settle at Rs223.69.

However, momentum shifted back to the negative zone, after Pakistan Bureau of Statistics (PBS) data showed the trade deficit widened by 24% month-month in November 2022.

In addition to this, the Consumer Price Index (CPI) based inflation in November arrived at 23.84%, up 0.76% month-on-month.

Furthermore, SBP’s foreign exchange reserves data showcased a decline of $327 million.

Too low to cover more than a month of imports, the reserves together with a widening current account deficit have threatened a balance of payment crisis for the country.

Supporters and laggards

Sector-wise negative contributions came from cement (243 points), technology (101 points), fertiliser (83 points), exploration and production (70 points), and banks (62 points).

Whereas, sectors that contributed positively were miscellaneous (82 points) and power (48 points).

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Scrip-wise negative contributors were TRG Pakistan (102 points), LUCK (79 points), Cherat Cement Company Limited (43 points), Millat Tractors Limited (39 points) and Maple Leaf Cement Factory (38 points).

Meanwhile, scrip-wise positive contributions came from Pakistan Services Limited (87 points), Hub Power Company Limited (59 points), System Limited (24 points), Habib Bank Limited (12 points) and Ibrahim Fibres Limited (4 points).

Sellers and buyers

Foreign buying clocked in at $6.6 million compared to a net buy of $1.1 million last week.

Major buying was witnessed in exploration and production ($2.0 million), cement ($1.8 million), and technology ($1.6 million).

On the local front, selling was reported by mutual funds ($6.3 million) followed by broker proprietary trading ($2.1 million).

Key developments

During the week, Hub Power Company announced its boiler steam blowing project has been completed at its Thal Nova plant, the Economic Coordination Committee of the Cabinet approved Kissan Package, the power tariff for tube wells was reduced to Rs13 per unit, Engro Fertiliser resumed operations at its Base Plant-1, while banking sector showed robust performance in 1HCY22.

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