Pakistan Stock Exchange daily trading volume slips to 18 month low
Pakistan Stock Exchange experienced volatility throughout the week ended on August 02, 2024 due to political upheaval, with the average daily traded volume falling to 337 million shares as against 358 million shares a week ago, down 5.9%WoW, marking a low of 18 weeks. The benchmark index closed with a loss of 196 points or 0.25%WoW, to close at 78,226 points on Friday.
Despite the 100bps cut announced in policy rate by the central bank on Monday, market sentiment remained skeptical.
Trade deficit for July 2024 was reported at US$1.95 billion, down 19%MoM.
The assassination of a prominent Hamas leader plunged the region into uncertainty, driving volatility in oil prices globally.
In a noteworthy development, the Consumer Price Index (CPI) for July was reported at 11.1%, marking its lowest level in 33 months.
China approved the conversion of three coal-fired power plants from imported coal to local coal, however no positive progress was reported on re-profiling of energy debt.
Punjab Government raised royalty rates for cement manufacturers, which may result in a further increase in cement price to the tone of PKR50/bag.
OMC offtakes declined to 1.2 million tons, down 17%MoM.
MS and HSD fuel prices were decreased by PKR6.17/ and PKR10.86 per liter, respectively, in the latest fortnightly review.
Foreign exchange reserves held by State Bank of Pakistan (SBP) reserves increased by US$75 million on a weekly basis to US$9.1 billion as at July 26. PKR largely remained flat against the greenback throughout the week to close at 278.5/ US$ on Friday.
Other major news flow during the week included 1) Fitch upgrades Pakistan’s rating to ‘CCC’ Plys, 2) Competitive wholesale electricity market under CTBCM on the cards, 3) Privatization Board okays PIA and DISCOs sale, 4) Pakistan reports primary surplus in FY24 after gap of 20 years and 5) GoP mulls ending free electricity for public sector.
Textile Spinning, Refinery and Automobile Assembler were amongst the top performers, while Leasing, Vanaspati & Allied Industries and Sugar & Allied industries were amongst the worst performers.
Major selling was recorded by foreigners with a net sell of US$2.23 million. Insurance companies and Individuals absorbed most of the selling with a net buy of US$1.78 million and US$1.47 million.
Top performing scrips of the week were: FFC, CNERGY, MUREB, ATRL and NCPL, while top laggards included: KOHC, BAFL, PIOC, DGKC and PGLC.
Going forward, recently announced rate cut alongside improvement in credit ratings by int’l agencies should boost investor’s confidence.
Additionally, the anticipated approval from the IMF executive board by the end of this month is likely to support bullish momentum.
Sectors benefiting from monetary easing and structural reforms would remain in the limelight. However, modest economic recovery would keep the upside in check for the cyclicals.
Profitability for the AKD banking Universe is likely to increase by more than 25%YoY to PKR186.8 billion for 1HCY24, as against PKR149.8 billion for the same period last year, while 2QCY24 net profit could stand at PKR93.8 billion, sown 2%QoQ but up 26%YoY. Overall, the brokerage house expects NII to remain stable in 2QCY24 as compared to the preceding quarter, as the effects of falling secondary market yields are anticipated to reflect in the asset book by October 2024 and beyond.
Aggregate deposit growth for the quarter was recorded at 9.9%QoQ and 22%YoY, possibly led by higher borrowing levels alongside the June-end effect. Overall, with profitability remaining firm amidst the higher opex being partially offset by surplus on AFS securities, and capital adequacy well covered, the brokerage house anticipates dividends to remain robust as in the previous quarter.
The KSE-100 index concluded its five-month positive streak with a modest decline of 0.7% in July 2024 as political noise overshadowed IMF program and interest rate cut. Continuous improvement in the external account along with the attainment of the IMF staff level agreement for EFF have sustained FIIs interest for straight sixth-month. Autos and Fertilizer sector remained among the top performers, whereas Tobacco and Power were the worst performers. Sectors benefiting from monetary easing and reforms would remain in the limelight. However, modest economic recovery would keep the upside in check for the cyclicals.
According to the recent notice from the Minerals and Mines Department of the Government of Punjab, the royalty on limestone has been revised to 6% of the ex-factory sales price of cement or clinker, up from the previous rate of PKR250/ton (for cement manufacturers. With this revised royalty rate, the cost of limestone per bag of cement is expected to increase to PKR55/ bag, as compared to the current cost of PKR19/bag. AKD Securities expects companies to pass on these cost pressures, effectively raising regional cement prices to PKR1,560/bag from the current PKR1,510/bag.
If companies with manufacturing units in other regions also raise prices in tandem to increase in Punjab, those outside Punjab could benefit. Conversely, if the cost pressures are not passed on, companies with manufacturing units in Punjab may experience negative EPS impacts.
Other provinces may also revise their royalty rates in line with those in Punjab, leading to a unified price increase. The brokerage house expects this event to have minimal impact on sector’s earnings. However, the rise in prices may dent local demand. Overall analysts maintain a bullish stance on the cement sector due to sustained gross margins and easing monetary policy.
OMC sector volumes ended the outgoing month at 1.196 million tons, marking an 11%YoY decline, lowest for the month of July in over 20 years. Moving forward, it is expected that increasing retail prices to take a toll on MS volume growth, as incentive for consumers to switch to LPG units on smaller cars/three-wheelers increases.
Company wise, major players in the sector, PSO/APL/SHEL/CNERGY, delivered throughput levels of 546k/102k/86k/36k, taking monthly market shares to 45%/8.5%/7.2%/3% for July 2024, respectively. Looking ahead to FY25, analysts anticipate a modest recovery in OMC sales.