PSX weekly review: Depleting foreign reserves, IMF limbo take a toll on KSE-100 index

• Week at PSX ends with a loss of 3.02%.
• The market settles at 43,383.
• Foreign selling clocks in at $1.88 million.

KARACHI: The Pakistan Stock Exchange (PSX) remained under pressure during the week ended May 13 as political and economic uncertainty prevailing in the country took a toll on the market.

With the bears refusing to relinquish control of the bourse as the rupee explored new depths, the tumultuous week at the PSX ended with a loss of 1,354 points, or 3.02%, as the market settled at 43,383.

The stock market commenced on a negative note this week over uncertainty over the International Monetary Fund (IMF) programme, whereby subsidy on petroleum products and electricity prices remain a hurdle.

Consequently, the Pakistani rupee plunged to an all-time low of Rs192.53 against the US dollar, while our foreign exchange reserves have shrunk to a 23-month low of $10.31 billion (down by $190 million week-on-week), which also triggered the downtrend.

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Furthermore, inflationary concerns picked up the pace with international oil prices climbing up once again after declining at the start of the week. While, cement dispatches witnessed a decline of 28.6% year-on-year.

However, an increase in remittances by 12% year-on-year followed by a 26.6% year-on-year jump in large-scale manufacturing output during March 2022 cushioned the overall decline in the market.

Other major developments during the week were: urea offtake surged 45% to 448,000 tons in April, Central Development Working Party cleared four projects worth Rs136.74 billion, Systems Limited acquired NdcTech, Pak Suzuki jacked up prices again, and National Saving Scheme profit rates raised by up to 250bps.

Meanwhile, foreign selling was witnessed this week, clocking in at $1.88 million against a net buy of $2.01 million recorded last week. Selling was witnessed in commercial banks ($1.6 million), and cement ($1.4 million).

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On the domestic front, major buying was reported by an bank ($16.3 million), followed by organisations ($1.5 million).

During the week under review, average volumes clocked in at 274 million shares (up by 13% week-on-week), while average value trade settled at $43 million (up by 21% week-on-week).

Major gainers and losers of the week

Sector-wise negative contributions came from banks (-351 points), cement (-211 points), fertiliser (-179 points), technology and communications (-68 points), and power generation (-63 points). On the flip side, positive contributions came from sugar and allied industries (+9 points), and miscellaneous (+1 points).

Scrip-wise major losers were Systems Limited (-121 points), Lucky Cement (-105 points), HBL (-78 points), Engro Fertiliser (-64 points), and UBL (-64 points). Meanwhile, major gainers were Pakistan Oilfields (+38 points), Millat Tractors (+20 points), and Lotte Chemical (+11 points).

Outlook for next week

A report from AHL said: “We believe clarity should emerge next week on certain economic policies which should aid sentiments at the bourse.”

“It appears that the government plans to remove the subsidy on fuel and electricity so as to gain IMF approval, which will be a positive for the market,” it said, adding that once the package comes through, other sources of foreign exchange reserves should also open up such as support from friendly allies as well as the Asian Development Bank (ADB).

“The KSE-100 is currently trading at a PER of 4.6x (2022) compared to the Asia-Pacific regional average of 11.9x while offering a dividend yield of 9.1% versus 2.8% offered by the region,” the brokerage house stated.