Summary
The monetary policy announcement on Tuesday to further increase the key policy rate by 100 basis points to 9.75 percent aimed to address rising inflationary pressure in economy and achieve a sustainable growth. However in rare move on Friday in an open market operations that included injection for a liquidity for 63-day period provided the money market with the total funds of Rs.1.77 trillion. Yields in the secondary market had become too unrealistic. The SBP injected liquidity for a longer period to give confidence to the market that the policy rate isn’t going up any time soon
The market started in ambiguous manner, as investors unsure about rise in policy rate which subsequently policy rate and OMO clarify the situation and market gained 505 points during the week.
The bench mark KSE-100 index surged by 1.2% WoW but remained under psychological level of 44,000 to close at 43,900.68. The average participation volume increased to 296m while market capitalization increased by Rs.65 bn to close at Rs.7519T.
Monday: KSE-100 index 42,876.37; Change (-519.41) Vol 150m Market CapRs.7367 T. Tuesday: KSE-1000 index 43,246.71 (+370.34 ); Vol 370 m and Market Cap Rs.7,420 T. Wednesday: KSE-100 index 44,366.86 Change(+1,120.15) Vol 398 Market Cap Rs.7,610 T. Thursday: KSE-100 Index -43,731.20 Change (-635.66) Vol 312m and Market Cap Rs.7,499 T and Friday: KSE-100 43900.68 m Change (+169.48) Vol 252m and Market Cap Rs.7519 T.
Participants /Activity
Foreigners net seller $3.45m; Company net buyers $5.14m; Bank seller$2.00m; Mutual Fund $0.15m; Insurance buyer $1.11m; and Individuals net buyers $2.71m.
Volume leaders during the were: WorldCall Tele 170m; Byco Petro. $89m; Telecard60m; TRG Pak 47m; Hum Network41m;Hascol Petroleum 27m; Fauji Foods and Unity Foods 14 m each; TPL Prop.13m and Fatima Fertilisers 7m.
Participants: Company Av.340; Gain 175 ; Loss 151 and Unchanged 14.
Triggers
- SBP reserves falls by $90 m to $18.568 bn during the week ended on Dec10 Overall reserves of the country dipped by $123mto $25.027 bn while the holding of the Banks slipped by $33m to$6.459 bn over the preceding week.
- Car sales jumps 62 pc to 90,303 units in July-Nov of the current fiscal year.
- Asaan Mobile Account with its ease of use will bring 50m Pakistanis under banking ambit said Mr. Reza Baqir SBP Governor of launching ceremony on Monday
- Exports of value –added textiles post double digit growth in November compared to the same month a year ago
- Govt reduced prices for petrol/diesel by Rs.5/litre adjusting decline in global oil prices
- Foreign direct investment plunged by 39 per cent month-on-month to $135.6 million in November. However, the inflows grew by 12 pc year –on-year to $798m in the first five months of the current fiscal year..
Conclusion
According to Dr. Salman Ahmed, head of macro and strategic asset allocation at Fidelity International a global investment firm, Oil prices to hit $150 barrel in 2022. There has been no investment on the supply side of oil in the last 7 years while demand for oil is coming down ‘very gradually’
MD Saad Bin Ahmed of KTrade Securities said valuations on the Pakistan Stock Exchange are hovering at 2001 level. The KSE-100 index is trading at a multiple of between 1.5 and 5 while price-to-earnings ratio shows the share prices of PSX-listed companies are currently under valued relative to their profit per share.
The benchmark is trading at 50 per cent discount to its 10-year historical mean of eight Mr. Saad said. “We expect the index to rise to 53,000 points in 2022. KTrade expect an upside of 20pc in 2022 versus the current level of 43,000-44,000n points. They project earnings growth of 12 pc and a dividend yield of 6 pc.
Currency depreciation and interest rate hike have “significantly increased the cost of owning a car” which will lead to a fall in demand for automobile in 2022. However ‘the commercial banks will emerge as key winners because of a sharp rise in lending rate.
Raees Uddin Khan
ISMAR: Institute of Securities Management Research& Training (Pvt) Ltd. Karachi
Dated: Dec 18, 2021