Pakistan bourse likely to remain under pressure

KARACHI: The KSE-100 Index lost 404 points to close at 45,676 level during the outgoing week ended February 18, 2022. Going forward, analysts expect the market to remain under pressure after the National Assembly passed the Ogra Amendment bills to bring entire liquefied natural gas (LNG) and re-gasified liquefied natural gas (RLNG) licensing and pricing under the regulatory framework.

“The FATF [Financial Action Task Force] meeting is scheduled next week and Pakistan is likely to remain in the grey list, which would keep the market under pressure,” an analyst at Pearl Securities said.

The Pakistan Stock Exchange KSE-100 shares Index shed 0.57 per cent, or 264.17 points, to close at 45,675.87 points. The KSE-30 shares index shed 0.74 per cent, or 133.97 points, to close at 17,803.93 points.

All-share average traded volume during the week remained low to stand at 191 million, down 8 per cent, compared with 207 million shares traded last week.

During the week, the market observed mix sentiments coupled with the lower participant’s interest, as global markets remained down, amid concerns over Russia-Ukraine conflict, uncertainty in domestic politics and higher international commodity prices.

The Senate passed a bill on Weighted Average Cost of Gas (WACOG). The bill allows the Oil and Gas Regulatory Authority (Ogra) to charge weighted average on cost of indigenous gas and imported RLNG to the consumers.

Muhammad Sohail, CEO of Topline Securities, said that the gas prices currently have a weight of 1.1 per cent in CPI basket, and a 30 per cent increase in gas prices could have an impact of 30bps on the overall CPI.

“The development could have a direct and an indirect inflationary impact.”

The development could be cash flow positive for Sui companies, as the government’s inability to increase the gas prices in line with the rising cost of gas has significantly hurt the cash flows of the companies.

“We believe that due to the government’s priority to incentivise export-based textile sector and agriculture-driven fertiliser sector, the government may keep them exempted for the increase in gas prices.”

To recall, the Cabinet had recently approved the Textile Policy 2021/25 in which it was decided that the government will review the regional tariffs for RLNG and gas and determine the tariffs for the textile sector.

Keeping this in view, the textile sector may continue to get concessionary rates. Further, fertiliser may also be prioritised given its significance; however, if the gas price increase is implemented.