E&P companies to remain on investors’ radar at PSX

KARACHI: The Pakistan bourse increased 1.3 per cent during the week ended March 4, 2022, which can largely be attributed to the contribution from the E&P, which gained on account of run up in the crude oil prices, amid the ongoing Russia and Ukraine conflict that has resulted in higher international commodity prices.

The Pakistan Stock Exchange KSE-100 shares Index gained 1.28 per cent, or 567.11 points, to close at 44,551.35 points. The KSE-30 shares index gained 1.97 per cent, or 337.79 points, to close at 17,428.85 points.

Average traded volume declined 22 per cent to 215.2 million shares and the value for the week surged 12 per cent to Rs7.6 billion.

Major events during the outgoing week were CPI inflation clocking-in at 12.24 per cent and the economic relief measures announced by Prime Minister Imran Khan, ranging from reduction in retail fuel price by Rs10/litre and electricity prices by Rs5/kWh.

Khan announced multiple incentives and policy actions to provide relief to the masses. The premier’s decision to reduce electricity and petrol prices is the most important aspect of this relief package, as the decision regarding reduction in the energy prices came at a time when the international commodity prices are skyrocketing, which will put a significant pressure on both fiscal and external sides.

An analyst at Insight Securities said: “We believe that E&P companies mainly Pakistan Petroleum Limited (PPL) and the Oil and Gas Development Company (OGDC) will remain on the investors’ radar due to possible resolution of the gas circular debt and dividend announcement.”

“Further, financing of the relief measures will put further pressure on the already shrinking fiscal space. This might cause T-bills yields to go up in the next auction, which might keep the equity investors on the sidelines. Overall this sudden populist move will help the PTI government to get some political ground but in an uncertain environment like this, this moves seems like a risky bet,” the analyst said.

In addition, the prime minister also announced multiple incentives for the IT sector coupled with subsidised loans for farmers and youth. One interesting development was the announcement of incentives for industries, where no question will be asked for industrial investment coupled with tax benefit on revival of sick units.

Meanwhile, the International Monetary Fund (IMF) has given a green light on the measures and the government will fund these subsidies through dividends from the state-owned enterprises (SOEs), leftover of the Covid and Ehsaas programme funds and Public sector Development Programme (PSDP) curtailment.