The KSE100 index witnessed another bullish week

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The KSE100 index witnessed another bullish week, rising by 1,606 pts to reach 37,584 index points and depicting an increase of 4.5% WoW. Sustained rally in Pakistan’s market has largely been a result of economic stabilization as evidenced by improving economic indicators. October’s trade deficit showed a reduction of 29% while SBP’s reserves once again managed to hold their ground and rise by USD40mn during the week. Positive sentiments were further reinforced by IMF expressing satisfaction over Pakistan’s progress towards achieving its targets. Market participation witnessed an uptick during the week as evident by 20% and 18% WoW rise in ADTO and ADTV to 311mn shares and USD64mn, respectively.

On a sector-wise basis, the auto sector managed to outperform the broader market, providing a return of 11.4% during the week. Positive sentiments in the sector were likely due to stability of the Pak Rupee, supporting the sector’s margins and profitability. Moreover, a higher than expected earnings of HCAR further shored up sentiments of the sector. OMCs and Cements provided a return of 7.3% and 5.5%, respectively, as investors placed their bets on recovering GDP growth rate, a scenario likely to alleviate the concerns of both these sectors. The fertilizer sector also provided a return of 6.0% as investors likely build their positions in the high-yield sector in view of the eventual monetary easing.

Foreign investors were net buyers during the week with net inflows of USD 4.3mn (four days). Much of the foreign interest was aimed at two key sectors namely Fertilizers and Banks in which foreign investors mopped up shares worth USD 4.1mn and 3.8mn, respectively. On the domestic front, Banks emerged as the biggest sellers offloading shares worth USD 17.6mn followed by Insurance companies, which sold stocks valued at USD 7.5mn during the week. Individuals and Mutual funds were the main buyers on the domestic front, both of which bought shares worth USD 14.2mn and USD 7.0mn, respectively.

Outlook

Most investors will keep an eye on the upcoming Monetary Policy Statement (MPS) as Pakistan’s economy is presently in a position to afford a cut in interest rates; we believe our view of a 50bps reduction in MPS, in-line with GoP’s stance of promoting growth in Pakistan’s economy. Moreover, the drowning of the political noise will further keep investors’ interest upbeat. We continue to remain bullish towards the market’s performance and recommend building positions in OGDC, PPL, MCB, UBL, EFERT, LUCK, NML, LOTCHEM, and HUBC. (BMA Capital Management Ltd.)

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