April 04, 2022 (MLN): The performance of the market during the month of March 2022 was somewhat capped by cautious investors’ sentiment amid heightened political noise after the no-confidence motion submitted by the opposition parties against Prime Minister Imran Khan in the assembly.
Nevertheless, a sharp month end rally rescued a listless month as 4.4% uptick in 8 sessions helped KSE-100 to deliver 1.1% MoM return in March which took the 1QCY22 return to 0.7%.
However, in USD terms, the market returns declined by 2.26% MoM in March’22 and 3.1% YoY during 1QCY22, mainly due to PKR depreciation against the USD.
The major factors that enhanced investors' buoyancy during March include the introduction of the Sahulat Account for retail investors who want to invest in the stock market with convenience, ease-off in the international commodity bull run, and the industrial package announced by PM Imran Khan for small and medium industries as part of the earlier relief package whereby petrol and power costs were slashed.
Moreover, a 78% MoM contraction in the current account deficit during Feb’22 coupled with a landmark agreement on the Reko Diq between the Federal and Baluchistan government with Barrick Gold Corporation, was also picked up by the market.
The performance of the market was somewhat capped by cautious investors’ sentiment throughout the month amid heightened political noise after the no-confidence motion submitted by the opposition parties against Prime Minister Imran Khan in the assembly.
Furthermore, the geopolitical uncertainty within the global front and depleting FX reserves which continued to put pressure on foreign currency with Rupee losing 4% of its value against the greenback during March’22 to reach all-time lows, caused a lack of upbeat triggers.
As a result, average traded volume and value during Mar’22 went down by 9% (206mn shares) and 16% (USD 35mn) MoM, respectively.
Overall, the market witnessed 13 bullish and 9 bearish sessions throughout the month as slight ease off in the international commodity prices lifted the market up.
Sector-wise, the performance chart during the month was led by Technology, Fertilizer, Chemical, Cement, and Food, each contributing 330, 288, 105, 59, and 41 points respectively.
On the flip side, the top 5 worst-performing sectors throughout the month were Banks, E&Ps, Oil & Gas Marketing companies, Refinery, and Paper & Board. These sectors collectively took away 427 points from the index.
Scrip-wise, SYS, FFC, EERT, TRG, and EPCL performed well during the month as they added 237, 158, 122, 114, and 72 points to the index respectively, whereas PSO, MCB, UBL, MEBL, and PPL were the worst performing securities during March 2022.
Meanwhile, the KSE All Share market cap decreased by Rs29.6 billion or 0.39% over the month, being recorded at Rs7.58trillion as compared to a market cap of Rs7.6tr recorded last month.
Flow wise, foreigners were the net sellers during the month, offloading $23.3mn from the equity market compared to $15mn worth of inflows last month. The major selling was observed in the Commercial Banks $23mn while Technology and Communication received an inflow of $4.5m
On the local side, the majority of the buying was reported by Banks, Individuals, and Organizations amounting to $15mn, $8.7mn, and $6mn respectively. However, Mutual Funds stood on the other side with a net selling of $9.1mn.
Market Outlook:
As the political tensions had reached highpoint on Sunday whereby the no-trust move against Prime Minister Imran Khan was rejected by Deputy Speaker National Assembly, terming it against Article 5 of the constitution after PM Imran Khan alleged that foreign powers are conspiring to topple his government.
The opposition has also termed the Speaker’s ruling unconstitutional and has filed a petition in Supreme Court (SC) against the issue. These developments have created a legal crisis in the short term which will impact the stock market, bonds and commodities, Umair Naseer analyst at Topline Securities said.
The early resolution of the crisis and supreme court ruling on the matter will bring some clarity and stability to the market and focus will likely shift back to the economy and outlook of economic policies, especially with IMF’s seventh review underway.
Timely disbursements of remaining tranches under the IMF program appear challenging, with ongoing talks affected by the PTI’s populist steps in March, Raza Jafri head of research at Intermarket Securities said.
If FX reserves continue to come off, and the IMF program is not revived quickly; it could sap local sentiment also, he added.
Moreover, as the PM has called an early election, this may cause a delay in decision making thereby further increasing economic challenges.
Lastly, Pakistan’s inclusion in the MSCI FM index effective May’22 should augment foreign activity in the bourse. Historically, foreign buying has been synonymous with good returns of the index, a note by Arif Habib Securities cited.
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