Positive motion likely to persists amid result season
The momentum gathered in the last trading session of earlier week, fueled further on the first trading session of the week ended on April 15, 2022. The investors across the board welcomed newly formed government; set up of coalition parties (PML-N, PPP, JUI-F and MQM-P) led by Shehbaz Sharif as newly elected Prime Minister. Filled with exuberance, the benchmark KSE-100 index registered 1,700 points gain on Monday – the largest single day return of 3.83%DoD to close the index at 46,145 points. The rally continued throughout the week, keeping KSE-100 index above 46,000 levels and closing the week at 46,602 points, up 4.85%WoW.
To top it off, PKR appreciated 1.7%WoW against the US$. Moreover, participation remained strong throughout the week averaging daily trading around 477 million shares, up 212.6%WoW. Major news flows during the week were: 1) The National Assembly expressing non-confidence in Imran Khan and electing Shehbaz Sharif as new Prime Minister, 2) The IMF welcoming SBP’s decision of raising the policy rate by 250bps to 12.25%, 3) GoP owing OMCs PKR55 billion in April 2022 fuel subsidy, 4) The new PM sending positive signals to China, United States, Russia and India, 5) Car sales in March 2022 increasing by 25/30% QoQ/YoY respectively, 6) Remittances in March 2022 rising to US$2.8 billion, and 7) Barrick betting big on Pakistan with US$7 billion in copper mining project.
Sector wise, Refineries topped with a gain of 26.6%WoW, followed by Engineering (9.4%WoW) and Tech (8.2%WoW), whereas across all sectors Woollen and Leasing gained 13.3%WoW and 11.2%WoW respectively – the most after Refinery sector. Flow wise, Individuals remained the major buyers with net buy of US$18.9 million) followed by Companies (US$2.12 million), while Mutual Funds were stood on the other side with net sell of US$9.9 million) followed by Insurance companies (US$7.8 million). Top performing stocks for the week were: CNERGY, NRL, ATRL, AVN and PIBTL, while laggards included: COLG, HGFA, GLAXO, MUREB and FML.
The positive momentum in the market is likely to continue in the near term. However, political arena is also heating up with PTI staging peaceful protest across the country. Even though this largely remains non-event from stock market’s vantage, any escalation in tensions can have negative impact on investor’s sentiment. Result season is likely to pick up pace in the upcoming week where surprises cannot be ruled out for driving individual stock performance. Major companies scheduled to announce results next week are: EPCL, POL, MLCF, EFERT, FFBL, ABL, HBL, UBL, ATRL, ASTL, ISL and ENGRO. Investors are advised to build long-term positions, limiting short-term trading.
The total industry sales in March 2022 were reported at 33,347 vehicles, up 24%YoY and up25%MoM, consisting of 22,799 passenger cars, 4,332 LCVs, and 500 trucks. The outgoing month witnessed the highest number of sales since April 2018. Total industry sales for 9MFY22 were reported at 251,660 units, up 44%YoY, consisting of 172,610 passenger cars, 32,754 LCVs and 4,262 trucks. This was continuation of strong demand; especially for passenger cars whose numbers have exceeded the previous high of 161,000 units in 9MFY18. The effect of stimulus provided in FY22 budget continues to persist despite the reversal through supplementary finance bill. Segment-wise, the 800cc segment emerged victorious, posting growth of 93%YoY and 35%MoM, followed by 1,300cc+ premium segment, growing 10%YoY and 43%MoM. On the flipside, the sales of 1,000cc segment declined 17%YoY and 28%MoM on account of supply chain issues due to persistent semi-conductor chip shortage. In 9MFY22, the volumes of 800cc/1,000cc/1,300cc+ segments have depicted a growth of 77/65/35%YoY respectively. Amongst major OEMs, INDU posted highest ever sales since its inception, clocking in at 7,068 units, growing 6%YoY/53%MoM. PSMC presented robust growth of 48%YoY and 18%MoM, all thanks to Alto whose sales clocked in at 9,814 units, up 107%YoY and 37%MoM). Similarly, HCAR depicted a growth of 16%YoY and 13%MoM. In 9MFY22, the sales of PSMC/INDU/ HCAR have posted a growth of 66/33/38%YoY respectively. On the macro perspective, analysts expect slight slowdown in the volumes going forward where the sales figures in upcoming months are extremely important to analyze the intensity at which the industry gets hampered. Surprisingly, the auto loans have depicted a slight increase of 1.3%MoM in February 2022 after declining 0.4%MoM in January 2o22. With SBP hiking another 250bps, the volumes ahead are bound to shrink.
In a long drawn struggle, former Prime Minister Imran Khan finally lost the no confidence vote in the National Assembly. The united opposition has nominated PML-N’s Shehbaz Sharif as Prime Minister and form a coalition government. Mr. Shehbaz Sharif, over the years, has forged a solid reputation of a capable administrator and brings with him a successful track record of running country’s largest province, Punjab, where he held office as chief minister multiple times under PML-N’s regime. Given that PML-N only has 84 seats (25%) in the center, the new PM will have to depend on his allies for policy making. However, given their historic differences, appeasing a large number of allied parties will likely be challenging. It remains to be seen if the new government complete the remaining term or early elections will be held. Analysts believe an un-easy alliance between the united opposition will continue where the focus will remain on not giving PTI a head start in the next general elections. For their part, PTI is contemplating en-mass resignations from the assembly and is currently organizing mass demonstrations throughout the country. The economy requires unpopular measures, beyond simply resuming the IMF program, which may erode support for incumbents. With elections due within next year and a half and annual budget just around the corner, we may see a pro-growth budget with fiscal prudence taking a back seat once again.