Pakistan Equities resumed their upward trajectory as the KSE-100 index hit a 33-month record high to settle at 46,386 points. Despite the ongoing rollover week, the market was set for modest gains as the index remained above the 46,000 mark to finally close at +518 points compared to last week. The Dec’20 quarterly results posted by Steel and Auto companies (ISL, ASL, HCAR) lifted the investor sentiments, as they exceeded street expectations by a wide margin. Investor participation soared by 36% WoW with average volumes clocking-in at 673Mn, whereas value traded also improved by 39% WoW to average at USD 169Mn.
The market kicked off the week on a positive note with the benchmark index surging 220 points on Monday after State Bank of Pakistan’s (SBP) decision to leave the policy rate unchanged at 7% for the next two months. Moreover, the decline in fresh COVID-19 infections to 32,000 and expectations of vaccination drive in the upcoming weeks bridged investor confidence. As reported previously, China had pledged to donate 500,000 doses of the SinoPharm vaccine to Pakistan, and the first batch is anticipated to arrive this Sunday. Globally, amidst the launch of vaccination drives, the International Monetary Fund (IMF) raised its overall forecast for economic growth in 2021. Its projection for Pakistan improved by 0.5 percentage points from the October forecast to 1.5%.
Top performing sectors were Refineries (↑ 10.8% WoW), Technology & Communications (↑ 8.2% WoW) and Cements (↑ 6.2% WoW), whereas Foods and Personal Care (↓ 2.8% WoW) and Oil Exploration Companies (↓ 1.8% WoW) lagged behind. On the other hand, foreign investors continued to offload positions as the net sell clocked-in at USD 9.1Mn. The selling was mainly absorbed by local individuals and companies with inflows of USD 8.6Mn and USD 8.1Mn, respectively.
In addition to above, some key data releases through the week which kept the investors engaged include: 1) FX weekly reserves, which reflected a decline of 0.1% to USD 20.1Bn, 2) Fiscal deficit numbers, which stood at 1.8% of Gross Domestic Product (GDP) during 5MFY21 as against 1.6% of GDP in SPLY, and 3) Fertilizer offtake for CY20, wherein the urea sales witnessed an attrition of 3% YoY to 6.0Mn tons, and DAP sales volumes surged by 7% YoY to 2.2Mn tons. Moreover, Treasury bill auction results were also announced during the week in which SBP accepted PKR 416Bn against the total participation of PKR 789Bn. Major participation was witnessed in 3-month bills at PKR 657Bn, whereas minimal interest was seen in 12-month bills which indicates the market participants are expecting a hike in interest rates.
Other news flow for the week included the book-building process of Panther Tyres Limited during the week which resulted in the strike price of PKR 65.8/sh, and the Initial Public Offering (IPO) concluded with an oversubscription of 4.4 times (Issue size of PKR 1.9 Bn).
Outlook
Considering the unchanged policy rate, upcoming vaccine rollouts and ongoing results season, we believe the market will sustain its upward trend going forward as well. PIB (fixed rate) auction is also scheduled for next week in which the government plans to raise PKR 100Bn. On the other hand, 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.
BMA Research