Weekly review: PSX snaps four week winning streak, falls below 46,000-point mark

• PSX succumbs to selling pressure; ends outgoing week at 45,749.15, down by 1,547 points or 3.3%.
• Foreign selling continued this week, clocking at $5.3 million.
• Arif Habib Limited notes that despite noise gaining traction on the economic front, “we believe there is some silver lining”.

KARACHI: After four uninterrupted weeks of positive closing, the Pakistan Stock Exchange (PSX) succumbed to selling pressure, ending the outgoing week at 45,749.15, down by 1,547 points or 3.3% week-on-week.

The stocks at PSX during the outgoing week showed weakness as market participants appeared frantic amid delay in a positive outcome from the International Monetary Fund (IMF) regarding resumption of the $6 billion Extended Fund Facility (EFF) for Pakistan.

As a result, the economic outlook appeared dubious.

Moreover, the Pakistani rupee came under immense pressure once again (down to Rs175.73 per US dollar compared to Rs170.01 per US dollar last week) as future disbursement of foreign flows remains uncertain prior to the IMF tranche release, while a high Consumer Price Index reading will implicate the government’s fiscal estimates (subsidies on staple foods, etc., to control rising inflation).

JS Global analyst Amreen Soorani said the benchmark KSE-100 index declined by 3.3% week-on-week, and most heavyweights closed in the red zone, with barely two sectors posting a positive close in the outgoing week.

“Uncertainty and lack of triggers wiped out most of the gains that were posted last week, taking the benchmark below the 46,000-point mark,” the analyst said, adding that the absence of clarity over talks with IMF kept investors shy. A delay in the receipt of the $3 billion cash deposits from Saudi Arabia and rising KIBOR also added to market woes.

Other major developments during the week were: foreign exchange reserves exceeds the $24 billion mark on official inflows, sales tax on petrol reduces, November RLNG price is reported 105% higher than last year, BlueEX seeks to raise Rs446 million in second GEM listing, and Q1 ends with a budget deficit of 0.8% of GDP.

Foreign selling continued this week, clocking at $5.3 million against a net sell of $11.2 million recorded last week. Selling was witnessed in commercial banks ($7.6 million) and cement ($3 million).

On the domestic front, major buying was reported by other companies ($6.5 million) and insurance companies ($5.7 million).

During the week under review, average volumes clocked in at 316 million shares (down by 26% week-on-week), while average value traded settled at $63 million (down by 29% week-on-week).

Major gainers and losers of the week

Sector-wise negative contributions came from banks (-277 points), cement (-255 points), technology (-226 points), exploration and production (-140 points), and engineering (-90 points), whereas positive contributions came from fertiliser (+37 points), and glass and ceramics (+3 points).

Scrip-wise major losers were TRG Pakistan (-140 points), Pakistan Petroleum (-73 points), Oil and Gas Development Company (-70 points), Lucky Cement (-65 points) and UBL (-65 points). On the flip side, major gainers were Fauji Fertiliser (+48 points), Engro Fertiliser (+17 points) and ABL (+9 points).

Outlook for next week

A report from Arif Habib Limited predicted noted that despite noise gaining traction on the economic front, “we believe there is some silver lining”; 1QFY22 fiscal deficit declined by 9.2% year-on-year whereas local production also appears under control (auto sales went up by 49% year-on-year and fertiliser — Urea — offtake went up by 23% year-on-year in October 2021).

“Therefore, we believe that market sentiment is hinged upon the announcement of the IMF package, which is currently being stalled by two departments of the IMF,” it said, adding, however, once through, the market is likely to post a rebound.

“The KSE-100 is currently trading at a PER of 4.9x (2021) compared to Asia-Pacific regional average of 14.9x while offering a dividend yield of 8.4% versus 2.2% offered by the region,” the brokerage house stated.