Daily Trading Volume up 28.5%WoW
The benchmark index of Pakistan Stock Exchange showed signs of weakness earlier in the week since Pakistan was not included in the IMF’s executive board meeting agenda, which led to a weekly loss of 0.4%WoW, closing at 78,488 points.
The Government of Pakistan (GoP) has requested Saudi Arabia to increase it’s lending by US$1.5 billion from existing US$5 billion and are also seeking US$4 billion from Middle East based commercial banks to seize the external financing gap.
The global rating agency Moody’s upgraded Pakistan’s debt ratings to Caa2 from Caa3 which instilled positivity among investors.
Market participation remained elevated, with the average daily traded volume rising to 602.12 million shares from 468.06 million shares a week ago, up 28.6%WoW.
According to news flows FBR is likely to miss August 2024 collection target by PKR50 billion.
Foreign exchange reserves held by State Bank of Pakistan (SBP) rose by US$112 million on a weekly basis to US$9.4 billion as of August 23, 2024.
During the week secondary market yields saw a marginal increase, which brought the 3-month yield to 18.05% and 1-year to 16.95%.
Furthermore, PKR largely remained stable against the greenback throughout the week, closing the week at PKR278.54/US$.
Other major news flows during the week included: 1) Punjab extended PKR14/unit power relief to federal capital, 2) finance minister announced incentives to attract foreign direct investment, 3) CPEC debt re-profiling plan amounting to US$8 billion prepared, 4) ECC approved two remittance incentive schemes and 5) Foreign investors repatriate US$139 million in July 2024.
Jute, Transport, Exchange Traded Funds, Food & Personal care products and Textile Weaving were amongst the top performing sectors, while Textile spinning, Leather & Tanneries, Vanaspati & Allied Products, Real Estate Investment Trust and Paper & Board were amongst the worst performers.
Major net selling was recorded by Banks/DFI with a net sell of US$3.85 million. Individuals absorbed most of the selling with a net buy of US$5.84 million.
Top performing scrips of the week were: NBP, COLG, GLAXO, MTL, and MARI, while top laggards included: ABOT, AVN, SRVI, SML, and PSX.
Looking ahead, market is expected to continue its positive momentum with anticipated August 2024 lower inflation reading, upcoming MPC result and any development on the IMF deal remaining in focus.
Analysts opine that sectors benefiting from monetary easing and structural reforms would remain in the limelight. With declining fixed income yields, high dividend-yielding stocks are expected to remain favorable.
In FY24, the auto sector struggled with sluggish demand recovery as total industry sales dipped by 6%, reaching 151,983 units. The industry saw muted sales throughout the year. Total industry sales remained subdued despite a low base effect caused by supply chain challenges and plant shutdowns from the previous year, resulting in a weak recovery. INDU reported total sales of 31,104 units, marking a 33%YoY decrease. However, SAZEW 4-wheeler sales reported at 5,374 units in FY24.
Total industry sales reached 17,717 units in June 2024, marking a 24% increase compared to the earlier month. Major improvement in volumes were witnessed by Passenger cars. Auto sales saw a monthly increase, yet the sector is anticipated to require additional time for complete recovery.
According to a report by AKD Securities, higher prices and financing rates dampen FY24 volumes. Total industry sales in FY24 reported at 151,983 units as compared to 161,632 units in FY23, marking a decline of 6%YoY.
The year saw negative growth throughout FY24, despite a low base effect caused by supply chain challenges and plant shutdowns from FY23, resulting in lowest annual volumes since FY21.
Overall, decline in volumes for passenger cars and LCVs were reported at 18%YoY during FY24, lowest since FY21. This decline may be attributed to two primary factors: 1) excessively high car prices and 2) record financing rates. To note, passenger car prices have doubled since FY21, with auto assemblers citing the blame on: 1) supply chain challenges, 2) currency devaluation and 3) higher taxation. However, there was some respite in prices during FY24, with OEM’s choosing to reduce amidst a stable currency and excessive over supply amidst falling demand.
Moreover, tractor sales experienced a 47%YoY surge, possibly fueled by enhanced agricultural activity during the year.
INDU reported total sales of 31,104 units, marking a 33%YoY decrease. Additionally, HCAR witnessed a decrease of 22%YoY during FY24, reporting 16,879 units sold during the year. Despite reducing prices for the City during the year to compete in the industry’s price war and benefiting from a low base effect caused by multiple days of plant shutdown in FY23, the volume did not recover. However, SAZEW 4-wheeler sales reported at 5,374 units in FY24, marking 2.94xYoY increase.
Total industry sales reached 17,717 units in June 2024, marking a 24% increase compared to the earlier month. Major improvement in volumes were witnessed by Passenger cars. The brokerage house believes the upswing was driven by consumers buying cars ahead of the FY25 budget in anticipation to change in tax policy, to evade extra charges resulting from potential tax policy alterations.
The recovery in overall volumes during FY24 was insufficient, remaining far below the peak levels seen in FY18 and FY19. Sales of passenger cars and light commercial vehicles (LCVs) were notably weak, declining by 18% as compared to FY23. This decline was primarily due to excessively high car prices throughout the year, coupled with record auto financing rates.
Looking ahead to FY25, the brokerage house projects FY25 Passenger car & LCV sales to grow by 10% (FY25 GDP growth at 3%YoY), potential monetary easing leading to increase in auto financing, thereby revitalizing growth in the auto sector. Nevertheless, new entrants in the auto sector pose a threat to existing OEMs and their market share.