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Stock Review

Stock review December 2022
Pakistan Stock Exchange benchmark index declines 6.69%WoW

After touching successive highs for the last two months, the benchmark index of Pakistan Stock Exchange (PSX) declined 6.69%WoW to close at 61,705 points on December 22, 2023. Overall, selling in scrips was witnessed as the year closes. On the brighter side, after much anticipation, ECP issued the elections schedule for February 08, 2024.

Moreover, Pakistan recorded a current account surplus of US$9 million in November 2023 after having seen four consecutive deficits in the months before.

Ministry of Energy authorized the plan to settle PKR262 billion payables to WAPDA and GPPs in accordance with IMF’s direction, to curb the rising power sector circular debt.

Moreover, Foreign Direct Investment for the first five months of current fiscal year rose to US$656 million, reflecting an increase of 8%YoY.

Power generation cost surged by 20%YoY in November 2023 to PKR7.17/kWh.

Market participation witnessed a slight decline, with daily traded volumes averaging 1.22 billion shares down 3%WoW.

On the currency front, the Pakistani Rupee maintained its appreciation momentum by gaining 0.26%WoW against the US Dollar, closing at PKR282.53/US$ by week-end.

Other major news flows during the week include: LSMI output for October 2023 decreased by 4.08%YoY, 2) Textile exports fell by 5.43%MoM in November, 3) Jul-Nov borrowing declined US$0.829 billion YoY to US$4.285 billion, 4) SBP reserves fell by US$136 million to US$6.91 billion, 5) Petroleum group imports for Jul-Nov witnessed 16.19%YoY decline.

Textile Weaving and Automobile Parts & Accessories were amongst the best performers, whereas, Close Ended Mutual Funds, Modarabas, and Investment Banks were the top laggards.

Major net selling was recorded by Mutual funds with a net sell of US$14.26 million. Insurance companies absorbed most of the selling with a net buy of US$9.31 million.

Top performing scrips of the week were: PSMC, HCAR, PSEL, while top laggards were: PIBTL, ANL, PAEL, DAWH, and PSX.

Going forward the market may see a correction, but still end the year with a positive note. Upcoming elections hold significance, and their successful conclusion could further elevate investor confidence.

Analysts advice the investors to retain long-term positions in companies with solid fundamentals, meanwhile exercising prudence in dealing with any fundamentally weak entities through a timely profit-taking approach. Moreover, companies with robust dividend yields, particularly in the Banking, Energy, and Fertilizer sectors, present opportunities for accumulation.

Pakistan’s textile exports were reported at US$1.3 billion for November 2023, down 8%MoM and 7%YoY. The decline was mainly due to recent surge in gas prices which led to increased challenges for textile exporters, making it difficult to compete in international markets.

In PKR terms, Pakistan Textile exports were recorded at PKR376 billion, down by 7%MoM, while up 19%YoY. The YoY increase was mainly due to rupee depreciation against dollar.

Basic textiles witnessed a fall of 14%MoM and a rise of 20%YoY to US$243 million for November 2023. The YoY substantial increase resulted from the 12x YoY increase in raw cotton exports. This surge is due to the significant growth in cotton crop this year as compared to last year, which was greatly affected by floods.

Value-added textile exports declined to US$920 million, a 6%MoM and a 12%YoY fall. Towels remained the major contributor to the segment with 21%MoM and 20%YoY fall in exports. Knitwear saw a 5%MoM and a 12%YoY fall, Bedwear saw a 16%MoM and 8%YoY fall and readymade garments saw a 12%YoY fall but a 5%MoM rise.

During 5MFY24, textile exports declined to US$6.9 billion from US$7.4 billion 5MFY23, posting a 6%YoY decline. This was majorly due to economic slowdown and a reduced demand of textile products worldwide.

The government has set a textile export target of US$25 billion. However the sector experts believe that textile exports for FY24 may touch US$17 billion.

Pakistan recorded its Current Account Deficit (CAD) of US$160 million in August 2023 as against US$775 million in July 2023 which is better than estimates. This takes 2MFY24 CAD to US$935 million against a CAD of US$2,035 million in 2MFY23.

Remittances were up 3%MoM to US$2.1 billion in August 2023. This takes 2MFY24 remittances to US$4.1 billion down 22%YoY.

Foreign exchange reserves of the country in August 2023 were up 2%MoM to US$13.2 billion. However, the reserves held by SBP were down 4%MoM to US$7.8 billion in August 2023, primarily due to the increased import payments resulting from the opening of LCs.

Pakistan’s CPI Inflation in August 2023 came down to 27.4%YoY from 28.3%YoY in July 2023 and 29.4%YoY in June 2023. This came lower than market expectations of 28-29% mainly due to lower food inflation. On MoM basis, CPI inflation was up 1.7% in August 2023 as compared to 3.5% in July 2023 and last 6 month average of 2.5%. This takes 2MFY24 average inflation to 27.84% as compared to 26.10% in 2MFY23.

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