Average daily trading volume increased by 31.0%WoW
Pakistan Stock Exchange (PSX) witnessed an overall lackluster week ended on March 10, 2023.The news about US$500 million inflow from China boosted reserves up to US$4.3 billion as of March 03, thereby instilling investor confidence. Despite fulfilling further IMF conditions, i.e. imposition of power surcharge and cabinet approval of 25% GST on luxury items, the long-awaited SLA (Staff-Level Arrangement) still hangs in the balance. The benchmark index closed the week at 41,794 points, indicating a 1.1%WoW gain.
The market witnessed an active participation, with daily trading volumes exceeding 209 million shares during the week as against an average of nearly 160 million shares in the last week, indicating an increase of 31.0%WoW.
As for the currency, PKR depreciated against the Greenback, losing 0.82% during the week to close at PKR280.77/US$ on Friday.
Other major news flows during the week included: 1) Pakistan got closer to signing IMF agreement, 2) Import curbs to be eased after IMF review, 3) Foreign exchange manipulation probe against banks completed, 4) ECP issued schedule for Punjab elections, to be held on April 30 this year, 5) PKR depreciation and borrowing raised debt stocks soar to PKR55 trillion by end January 2023.
Engineering, Tobacco and Cable & Electrical goods were amongst the top performing sectors, As against this, Miscellaneous, Woollen and Textile weaving were amongst the worst performers.
Flow wise, major selling was recorded by Mutual Funds with a net sell of US$5.92 million. Companies absorbed most of the selling with a net buy of US$10.53 million.
Company-wise, top performers during the week were: PGLC, PIOC, KTML, AKBL, and KOHC, while top laggards included: PSEL, UPFL, AICL, BNWM, and SML.
The market is expected to remain range-bound in the near future as already record-high inflation is expected to rise further, leading to another potential hike in the interest rate in the upcoming Monetary Policy Committee meeting scheduled for April 04, 2023. Furthermore, the long-awaited Staff-Level Agreement with the IMF will remain a topic of focus, and if achieved, could potentially bolster investor confidence and lead to euphoria in the market. Investors are advised to stay cautious while building new positions in the market.
Local cement dispatches were reported at 3.6 million tons for the month of February 2o23, remaining flat on monthly basis while down by 9.2%YoY. On the contrary, exports rebounded during the month to 0.45 million tons, posting an increase of 7.6%NoN and 11.0%YoY. Overall, in 8MFY23, total offtakes declined by 16.7%YoY to 29.8 million tons as compared to 35.8 million tons for the same period last year. International Coal prices witnessed a meltdown in recent days with Richard Bay moved down to US$124/ton, from US$187/ton at the start of the calendar year. Cement retail prices increased by 7% in the previous month, currently hovering at PKR1,100/PKR1,141 per ton in North/South as against January 2023 average of PkR1,028/PKR1,070 per ton. Analysts continue to advocate LUCK, MLCF, and FCCL on the back of timely expansions, low leverage, and better production efficiencies contributing positively to margins going forward.
Urea sales for January 2023 were reported at 631,300 tons, down by 24%MoM as the Rabi sowing season draws to a close. On the flipside, urea offtakes have increased by 6%YoY, supported by the government led imports which held a market share of 22%. Urea offtakes for the largest manufacturers remained flat on the MoM and YoY basis, with EFERT selling 215,400 tons and FFC selling 215,800 tons. Plants running on RLNG faced unavailability of gas during the month, leading to a 17% decline in the production of urea during the month. DAP sales recorded a significant decline by 39%MoM despit the average prices of the nutrient remaining stable in the month. After posting 95,800 tons sold during the month, DAP offtakes witnessed a decline of 15%YoY. Going forward, analysts expect urea offtakes to decline further in the coming months as the Rabi sowing season has drawn to a close. DAP sales should remain relatively stable in next few months owing to the already dampened demand the nutrient is seeing currently.
UBL posted strong financial performance for 4QCY22, wherein the bank recorded profit after tax of PKR13.3 billion (EPS: PKR10.9) for the final quarter, higher by 102% as compared to 3QCY22. 4QCY22 earnings were spearheaded by core banking operations, wherein the bank posted NII of PKR31.8 billion, up by 10%QoQ and 67%YoY, driven by NIM expansion. The bank was able to increase its ADR to north of 50%, which culminated in a reversal of the excess taxation charged earlier in the year. The bank was able to increase its ADR through a 13%QoQ reduction in deposits, majorly shedding high-cost term deposits. Bank’s net advances increased by 31%QoQ to PKR1.1 trillion by end CY22 with the sector mix skewing away from relatively riskier industries in the current economic situation. Textile sector’s share in advances was reduced from 14.2% in CY21 to 10% in CY22. At the end of CY22, UBL’s consolidated CAR stood at 17.4%, giving the bank substantial room for pursuing growth opportunities. Furthermore, the asset quality of the bank is intact, with an infection ratio of 8% and coverage of 96.6% at the end of the year.
Sales of petroleum products were reported at 1.22 million tons for February 2023, a fall by 16%MoM and 21%YoY. This marks the biggest monthly decline after July 2022, when it went down 26%MoM. The fall can be attributed to significant price hikes in MS and HSD during the last 45 days. In addition, there were severe fuel shortages at petrol stations in Central Punjab, as talks of price hikes remained rampant throughout the month. This led to dealers choosing to stockpile fuel instead of continuing with normal operations. The situation was further exacerbated by OMCs which struggled to obtain timely shipments of petroleum products, due to the sharp decline of the PKR during the period. This resulted in delayed L/C clearances and significant exchange losses for the importing entities, ultimately leading them to restrict their supplies to dealers throughout the country. Finally, lesser working days also contributed to the monthly decline of POL sales during February 2023.