The BMA Capital Management Ltd expects the market to remain upbeat given the improving macroeconomic indicators, upcoming result season, and sooner-than-expected vaccine rollouts. However, the index might witness some corrections next week as the roll-over week approaches. We continue to prefer banks, E&Ps, fertilizers, automobiles, and cements.
Our strategy report (click here) released this month further highlights our top stock picks and ongoing year outlook. Key highlights for next week include the auctions for PIBs (Floating Rate) and T-Bills in which the government plans to raise PKR 460Bn cumulatively.
The recent rally in Pakistan Equities seem to be losing steam as the KSE-100 index slightly edged down by 63 points WoW primarily on account of the upcoming rollover week at the bourse. As of January 21, 2021, the outstanding futures value was recorded at PKR 23.5Bn as compared to PKR 23.7Bn last week (January 15, 2021). Investors were also eyeing on the first Monetary Policy Committee (MPC) meeting of the year scheduled this week. The State Bank of Pakistan (SBP), in line with market consensus, has decided to keep the policy rate unchanged at 7%. During the week, the benchmark index slipped by 0.14% WoW to settle at 45,868 level.
The investor participation declined by 29% WoW with average volumes clocking-in at 494Mn, while the average traded value also decreased by 14% WoW to reach USD 122Mn.
On the other hand, concerns related to coronavirus seem to be settling down as the active number of infections have reduced to 35,000. Moreover, the news of China providing 0.5Mn doses of Sinopharm vaccine to Pakistan by the end of this month slightly uplifted the market sentiments. Globally, the equity markets soared to record-highs as Joe Biden was sworn in as the 46th president of United States. Following the news, the NASDAQ index gained 1.52%, while Dow Jones index was also up by 0.4%. The oil prices also edged higher, with Brent oil reaching above USD 56 per barrel, due to expectations of hefty pandemic-related economic stimulus, and pro-green energy policies by Biden administration.
Foreign investors were net buyers with net inflow of US6.1mn for the week (four days) whereas among domestic participants, individuals and companies were major buyers with inflows of USD14.6mn and USD4.1mn. Additionally, top-performing sectors were Technology & Communications (↑ 3.2% WoW) and Oil Marketing Companies (↑2.9% WoW) , whereas Refineries (↓ 3.6% WoW) and Oil & Gas Exploration (↓ 2.4% WoW) lagged behind.
The power sector stayed in limelight during the week as progress was made on negotiations between the government and Independent Power Producers (IPPs) to resolve circular debt issues. Six more IPPs (19 in total) have moved ahead on the draft agreement for binding contracts with the government, paving way for reduction in tariff and circular debt in coming years.
The key data releases during the week included the following: 1) FX weekly reserves, which have dropped by 1.9% WoW to USD 20.1Bn, 2) SPI weekly number, which improved by 0.32% WoW to 140.2 points, 3) Current account numbers, which posted a surplus of USD 1.13Bn in 1HFY21 as opposed to deficit of USD 2.03Bn in SPLY, 4) Total government borrowing, which showed an increase of 11.5% to PKR 35.8Tn and 5) Foreign Direct Investment (FDI), which plunged by 29% to USD 0.95Bn during 1HFY21.