Equity Roundup:
The KSE-100 index lost around 25 points during the week and closed 32,806-mark i.e. nearly 0.08% percent lower than the closing of the previous week.
“The market commenced on a positive note, continuing the unpreceded rally witnessed on last Friday over SBP’s surprise rate cut of 200bps. Albeit, the euphoria was short lived with investors parring earlier gains as banks felt the heat of compression in NIMs while oil scrips tanked with international oil prices” Arif Habib said in its weekly report.
Cement and Fertilizer Sector made the highest gains during the week, as they collectively added 240 points to the benchmark index. On the contrary, Investment Banks, E&P Companies and Power Generation sector incurred the maximum losses as they took away 51 pts, 48 pts, and 43 pts from the index respectively.
Figures released by NCCPL showed that foreign investors dumped USD 2.52 million worth of stocks during the week with foreign corporates doing the bulk of the selling.
On the local front, Mutual Funds picked up USD 18.4 million worth of stocks, followed by USD 5 million worth of stocks purchased by local companies.
Forex Roundup:
PKR appreciated against the dollar for the second straight week, gaining another 3.1 Rupees.
All told, the local currency has appreciated by 6.3 Rupees or 3.79 percent in the last two weeks.
10-day volatility increased from 10.20 percent to 11.25 percent as the dollar hit a high of 163.70 (bid) and a low of 159.6 (ask) during the week.
It was also the first time since March 24, 2020, that the Dollar fell below 160 level.
The rupee gained as IMF approved, and has since released, USD 1.386 billion under the Rapid Finance Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic, this along with a reduction of 73 percent in the current account deficit during the fiscal year lifted sentiment.
Foreign investment into Govt Securities, which witnessed an inflow of USD 200 million on April 17, has since seen additional inflows of just 4.185 million whereas outflows, for just the first three days (data released so far by SBP) of the week amounted to USD 121 million.
Foreign investment data released by SBP showed disinvestment in Debt Securities was to the tune of USD 1.830 billion in the month of March.
Fixed Income:
Secondary market yields showed a mixed trend as shorter-term yields witnessed a significant decline while longer-term yields increased.
Yields for 3, 6, and 12 months declined by 54, 89, and 109 basis points while 3Y PIB yields decreased by 13 basis points however the 5 and 10-year bond yields increased by 18 and 54 basis points.
While the longer-term yields were relatively flat as on April 20 with the spread between 3 to 10-year PIBs between 5 basis points, the trend changed this week as the spread increased to 72 basis points, ending the inversion of the yield curve.
According to a report by JS Global “, the slight elevation at either end of the curve implies a preference for the medium-term bonds (~3-yr). Upon closer inspection, the slight steepness towards the longer end of the curve suggests (a) 5-yr and 10-yr bonds do not enjoy the same demand that they did a few months ago and (b) selling off-the-run long term bonds by some unlevered funds that target absolute returns. The latter, in our view, is merely a temporary phenomenon and a flatter curve can be expected once this dies out.”
Reviewing the recent MTB auction and its Bid pattern, the Report by JS added “it would be safe to say that the market is anticipating another generous rate cut. That the 12M bid started at 7.14% implies that certain factions of the market expect at least a further 200bps cut in the near future.”
Furthermore, the SBP also conducted an auction on Thursday in which it sold variable interest rate GOP Ijara Sukuk worth Rs.76.384 billion at cut off of 125 basis points under the benchmark.
This is the first time the government has issued a 5 year Sukuk and the first variable rate Ijara since December 2015.
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