The market commenced on a negative note amid anticipation of a massive hike in policy rate. Moreover, expectation of announcement of mini-budget further dented the sentiment. However, market recovered post Monetary Policy announcement as clarity was provided by the SBP in its forward guidance suggesting no further hike in near-term. Along with this, SBP also disclosed that it is close to achieving mildly positive real interest rate, which further boosted investor sentiment (index going up by 1,200 points on Wednesday).
In addition, on the external front, growth in remittances by 9.7% to USD 12.9bn in 5MFY22 was a positive development. However, bears returned as investors resorted to profit taking. Furthermore, the USD/PKR Parity witnessed another all-time low of PKR 178.04. The market closed at 43,901 points, gaining 505 points (up by 1.2%) WoW.
Sector-wise positive contributions came from i) Cement (282pts), ii) Technology & Communication (173pts), iii) Textile Composite (74pts), iv) Engineering (70pts), and v) Refinery (50pts). Whereas, sectors which contributed negatively were i) Commercial Banks (208pts) and ii) Fertilizer (17pts). Scrip-wise positive contributors were TRG (112pts), LUCK (111pts), MLCF (45pts), SYS (43pts) and CHCC (36pts). Meanwhile, scrip-wise negative contribution came from MCB (71pts), UBL (63pts) and MEBL (29pts).
Foreign selling continued this week, clocking-in at USD 3.5mn compared to a net sell of USD 0.99mn last week. Major selling was witnessed in Cements (USD 1.9mn) and Technology and Communications (USD 1.9mn). On the local front, buying was reported by Companies (USD 5.1mn) followed by Individuals (USD 2.7mn). Average volumes clocked-in at 265mn shares (up by 30% WoW) while average value traded settled at USD 84mn (up by 13% WoW).
Other major news: i) LSMI output up 3.56pc YoY in Jul-Oct’21, ii) PRL shuts down refinery on weak furnace oil demand, inventory glut, iii) Petrol and diesel prices slashed by Rs5 per litre, iv) IMF projects gross debt at 83.4pc of GDP and v) SNGPL suspends gas supply to captive power plants.`
Outlook and Recommendation
We expect the market to remain positive in the upcoming week. With recent injection by the SBP via OMO for 63 days, money market yields are expected to come down further. This is most likely to reignite investors’ interest in the stock market. Furthermore, scrips have opened up to attractive valuations. Moreover, mini budget expected to be announced soon, where the market is expected to react to any introduction, re-imposition or removal of duties and subsidies. Our preferred stocks are OGDC, PPL, PSO, HUBC, HBL, MCB, FABL, LUCK, FFC, ENGRO, INDU, EPCL, PTL, HTL and ILP. The KSE-100 is currently trading at a PER of 4.7x (2022) compared to Asia Pac regional average of 14.9x while offering a dividend yield of ~8.8% versus ~2.2% offered by the region.
Courtesy – AHL Research