The market commenced negatively, given the investors resorted to profit-taking. The momentum shifted towards the green zone post the announcement of single-digit inflation of 9.6% (34-month low), renewing expectations of a cut in the policy rate in the upcoming MPC meeting next week. Furthermore, on the IMF front, the government is hopeful that all the conditions and requirements of the lender will be met in time and that Pakistan’s case will be approved by its board. On the economic front, the trade deficit reduced to USD 1.7bn (11-month low) in Aug’24 from 2.1bn in Aug’23. Furthermore, the petroleum sales witnessed a decline of 14% YoY in Aug’24.
Moreover, urea and DAP sales plummeted by 14% and 70% YoY, respectively, in Aug’24. In addition, the total cement sales declined by 26% YoY in Aug’24. The SBP reserves climbed up by USD 33mn WoW, reaching USD 9.4bn. However, the market closed at 78,898 points, gaining 410 points | 0.5% WoW.
Sector-wise positive contributions came from i) E&Ps (248pts), ii) Cement (191pts), iii) Fertilizer (68pts), iv) Power Generation (61pts) and v) Auto Assembler (56pts). Meanwhile, the sectors that mainly contributed negatively were i) Commercial Banks (-89pts), ii) Chemical (-40pts), and iii) Technology (-39pts). Scrip-wise positive contributors were MARI (172pts), UBL (117pts), KOHC (85pts), OGDC (82pts), and EFERT (63pts). Meanwhile, scrip-wise negative contributions came from MEBL (170pts), POL (54pts), NBP (51pts), HBL (49pts), and COLG (35pts).
Foreigner selling was observed this week, clocking in at USD 6.7mn compared to a net buy of USD 3.7mn last week. Major selling was witnessed in Fertilizer (USD 2.6mn) and Exploration and Production (USD 2.2mn). On the local front, Individuals reported buying (USD 5.7mn) followed by Other Organizations (USD 3.3mn). Average volumes arrived at 676mn shares (up by 11.8% WoW), while the average value traded settled at USD 52mn (up by 22.5% WoW).
Other major news: i) Kohat Cement board announces buyback of up to 12 million shares, ii) Sazgar’s four-wheel vehicle sales increase by 219% YoY in Aug’24, iii) 3 Oct cargoes to be cancelled: Leading OMCs’ Sept cargo deferred, iv) Price of petrol and diesel reduced by Rs. 1.86/ltr and Rs. 3.32/ltr, and v) Jul-Aug exports up 14pc to $5.05bn YoY.
Outlook and Recommendation
The market participants are expected to closely monitor the MPC meeting in the coming week (12th Sep’24), where we expect a policy rate cut of 1.5%. Furthermore, any developments related to the IMF program will further influence the market sentiment. Moreover, with the ongoing result season, particular stocks are anticipated to garner interest owing to their expected robust financial performance. Hence, we expect the market to be positive in the upcoming week. Our preferred stocks are OGDC, MCB, UBL, HTL, MEBL, FABL, HBL LUCK, MLCF, FCCL, FFC, HUBC, PSO and SYS. The KSE-100 is currently trading at a PER of 4.1x (2025) compared to its 5-year average of 5.9x, offering a dividend yield of ~10.3% compared to its 5-year average of ~8.2%.
Courtesy – AHL Research
