September 01, 2023 (MLN): The benchmark KSE-100 Index closed the month of August at 45,002 points, down by 3,032 points or 6.31% MoM, leaving investors in a state of disbelief and dismay.
To note, this was the highest monthly decline in percentage terms since the Covid-19 pandemic.
The average KSE-100 daily volumes during August 2023 dropped by 11.57% MoM to 164.8 million shares as compared to the previous month. Meanwhile, the average daily traded value inched up by 1.78% to Rs9.73bn compared to Rs9.56bn in the previous month.
While the returns in US Dollar terms were even more brutal thanks to the continuous depreciation of the PKR.
Foreign and Local Investors Portfolio Investments (LIPI, FIPI)
The dominant buyers were Insurance Companies, with a significant net investment of $36.44 million. They allocated the majority of their capital, $11.4 million, to Commercial banks, while divesting from the Food and Personal Care Products sector, amounting to $1.32 million in sales.
On the flip side, the leading sellers were Banks/DFI, with a net sale of $21.53 million, signifying a substantial divestment from their portfolio investments. Their most substantial sales activity was in the Oil and Gas Exploration Companies sector, amounting to $9.6 million, while they made acquisitions in the technology sector worth $0.74 million.
| SECTOR NAME | FOREIGN CORPORATES | FOREIGN INDIVIDUAL | OVERSEAS PAKISTANI | BANKS / DFI | BROKER PROPRIETARY TRADING | COMPANIES | INDIVIDUALS | INSURANCE COMPANIES | MUTUAL FUNDS | NBFC | OTHER ORGANIZATION | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cement | -256,806 | -3 | 650,652 | -3,482,105 | -513,600 | 11,775,100 | -3,099,536 | -373,483 | -4,117,216 | -6,509 | -576,454 | 40 |
| Fertilizer | -759,359 | -9,872 | -88,289 | -83,487 | -261,818 | -731,072 | -315,009 | 4,726,199 | -1,968,702 | -267 | -508,309 | 15 |
| Food and Personal Care Products | 1,603,808 | 17,699 | -238,374 | 131,063 | -252,495 | -189,111 | -231,490 | -1,315,081 | -337,561 | -2,110 | 813,671 | 19 |
| Oil and Gas Exploration Companies | 5,006,959 | -6,275 | 552,237 | -9,599,982 | 3,023 | 162,068 | -1,330,026 | 8,995,242 | -3,309,543 | -43,104 | -430,578 | 21 |
| Oil and Gas Marketing Companies | -167,052 | 939 | -138,225 | -998,133 | -406,185 | 473,522 | -1,054,060 | 2,709,494 | -385,061 | -2,549 | -32,688 | 2 |
| Power Generation and Distribution | -282,154 | -10,806 | 361,415 | -2,862,156 | -872,830 | 1,413,056 | 480,795 | 2,789,285 | -1,011,819 | -3,051 | -1,729 | 6 |
| Commercial Banks | 8,633,278 | 4,434 | -2,203,342 | -5,916,068 | -2,533,870 | 37,039 | -4,334,325 | 11,410,569 | -515,063 | -18,563 | -4,564,064 | 25 |
| Technology and Communication | 3,558,840 | 70,156 | 192,807 | 737,652 | -652,282 | -1,279,865 | -1,410,551 | 228,154 | -1,407,691 | 1,709 | -38,918 | 11 |
| Textile Composite | -76,111 | 24,858 | 63,467 | 300,607 | -407,836 | 4,788,558 | -692,950 | 301,882 | -3,941,938 | -5,584 | -354,939 | 14 |
| Debt Market | – | – | – | – | 341,833 | – | – | 665,239 | -1,009,582 | -26,709 | 29,219 | 0 |
| All other Sectors | -3,250,492 | -32,145 | -351,535 | 245,257 | -482,907 | 1,487,907 | 1,375,758 | 6,305,231 | -1,991,003 | -53,402 | -3,252,622 | 47 |
| Total | 14,010,911 | 58,985 | -1,199,187 | -21,527,352 | -6,038,967 | 17,937,202 | -10,611,394 | 36,442,731 | -19,995,179 | -160,139 | -8,917,411 |
Amount in USD
August's Sentiment Shift: From Euphoria to Uncertainty
The Pakistani stock market kicked off the month of August 2023 with a remarkable bullish rally, building upon the momentum from the preceding month. Several factors fueled this optimism, including the approval of a refinery policy, the anticipation of resolving the gas circular debt issue, and Pakistan's significant ascent in the Morgan Stanley Capital International (MSCI) FM index.
The country's weight in the MSCI FM100 Index increased by 34 basis points, reaching 2.93% from the previous 2.59%, reflecting its growing prominence on the global financial stage.
This newfound confidence propelled the Pakistani stock market to a remarkable milestone. On August 03 the benchmark KSE-100 Index soared past the psychological mark of 49,000, a level not witnessed in six years.
However, this euphoria proved short-lived as economic uncertainties began to surface. One of the most concerning of these developments was the continuous depreciation of the Pakistani Rupee (PKR) against the US Dollar.
In just a span of one month, the PKR lost 6.18% of its value against the US Dollar, hitting a historic low of PKR 305.54 against the US Dollar.
This devaluation had a cascading effect, contributing to a sharp decline in the KSE-100 Index.
The analyst fraternity is of the view that the primary catalyst behind this downturn was this continuous depreciation of the PKR and the looming possibility of interest rate hikes due to high inflation. Investors grew increasingly wary of the deteriorating economic conditions, leading to a significant sell-off.
The nation was hit by the steep rise in inflation on the back of surging electricity bills, petroleum prices, and food prices.
On a monthly basis, in July, the Consumer Price Index (CPI) surged by 3.5% MoM, a stark contrast to the 0.3% MoM decrease in June 2023.
The economic turmoil was further exacerbated by the current account balance, which plummeted to a negative $809 million in July 2023. This stark deficit was a stark departure from the $334 million surplus reported just a month prior in June 2023.
Remarkably, this deficit followed four consecutive monthly surpluses, underscoring the volatility and uncertainty in the economic landscape.
Outlook
Market participants are now closely monitoring the upcoming CPI data due today, which will be pivotal for the next Monetary Policy Committee (MPC) meeting on September 14.
Many experts anticipate a rate hike as a potential response to the challenging economic conditions. The road ahead for Pakistan's financial markets remains uncertain, with investors and analysts closely watching for signs of stabilization and recovery.
However, there seems to be no sight of stabilization of the local currency, coupled with the gap between the open market and interbank exchange rates continuously widening.
This situation can be likened to what experts often term in the financial market as 'catching a falling knife'.
Moreover, the country's foreign exchange inflows also appear to have dried up, adding an additional layer of complexity to the already challenging economic landscape.
Copyright Mettis Link News
Posted on: 2023-09-01T15:05:27+05:00
