The market commenced on a positive note this week given flattening of the COVID-19 curve along with higher recovery rate of patients. Furthermore, jump in SBP’s foreign exchange reserves (up by USD 811 mn), reduction in mark-up on Long Term Financing Facility (from 6% to 5%) and Temporary Economic Refinance Facility (from 7% to 5%) as well as extension in deferment of principal amount facility pushed the index beyond 36,000 points level. Moreover, surge in cement sales by 30% YoY in Jun’20, fall in trade deficit by 27% YoY in FY20 and 19% YoY higher sales of OMCs during Jun’20 added fuel to the sentiment. The index settled at 36,190 points, gaining 1,139 points (up by 3.3%) WoW.
Sector-wise positive contributions came from i) Commercial Banks (495pts), ii) Cement (141pts), iii) Oil & Gas Exploration Companies (135pts), iv) Automobile Assembler (82pts) and v) Oil & Gas Marketing Companies (69pts). Whereas, negative contributions came from Power Generation and Distribution (23pts) and Fertilizer (17pts). Scrip-wise positive contributions were led by HBL (141pts), PPL (70pts), UBL (65pts), NBP (46pts) and INDU (43pts).
Foreign selling continued this week clocking-in at USD 9.5mn compared to a net sell of USD 20.5mn last week. Selling was witnessed in Commercial Banks (USD 2.9mn) and Cement (USD 2.3mn). On the domestic front, major buying was reported by Insurance Companies (USD 4.6mn and Companies (USD 2.8mn). Average volumes settled at 349mn shares (up by 39% WoW) while average value traded clocked-in at USD 74mn (up by 44% WoW).
Other major news: i) OGDC injects development well Mela # 07 in production stream, ii) Cement makers increase price by Rs20 a bag, iii) PIA resumes UAE flights, iv) The Organic Meat Company Limited raises Rs800mn by offering 40mn shares, v) Cement producers increase price by Rs.20/bag and iv) OMCs refuse to import Euro-V fuel.
Outlook and Recommendation
We expect the market to maintain its positive momentum in the coming week. Investor’s sentiment is expected to improve further on account of continuous decline in COVID-19 cases on a daily basis. Moreover, with the SBP’s foreign exchange reserves climbing up, we expect the PKR/USD parity to stabilize. Our preferred stocks are OGDC, HUBC, HBL, BOP, MCB, FFC, LUCK, ENGRO, NML, ILP, KOHC and ACPL. The KSE-100 index is currently trading at a PER of 7.7x (2020) compared to Asia Pac regional average of 13.1x and while offering DY of ~6.2% versus ~2.7% offered by the region. (AHL Research)