A voyage beyond 62,000 points level at PSX

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Market Commentary

The market momentum remained buoyant, surpassing 62,000 points again from 59,000 points last week. The elated sentiment comes amid an agreement between winning political parties to form a coalition government. On the economic front, the current account shifted to a deficit of USD 269mn in Jan’24 from a surplus of USD 404mn in Dec’23. In addition, the remittances reported a growth of 26% YoY in Jan’24. Meanwhile, the Treasury bills auction held this week showcased an increase in cut-off yields by 126bps and 25bps of 3M and 12M tenors. Meanwhile, NSS rates showcased a decrease across different certificates (ranging from 40bps – 160bps). Furthermore, the power generation climbed up by 7.6% MoM in Jan’24. Moreover, Roshan Digital Account in Jan’24 witnessed an inflow of USD 142mn in Jan’24, settling at USD 7.3bn. The foreign reserves held by SBP declined by USD 44mn WoW, clocking in at USD 8.0bn on 16th Feb’24. The market closed at 62,816 points, significantly gaining 2,943 points | 4.92% WoW.

Sector-wise positive contributions came from i) E&Ps (623pts), ii) Banks (513pts), iii) Technology (355pts), iv) Fertilizer (255pts) and v) Power (254pts). Meanwhile, the sectors which mainly contributed negatively were i) Miscellaneous (26pts) and ii) Chemical (16pts). Scrip-wise positive contributors were OGDC (340pts), PPL (221pts), HUBC (216pts), SYS (201pts) and MEBL (195pts). Meanwhile, scrip-wise negative contributions came from PSEL (57pts), NESTLE (20pts), COLG (15pts), FATIMA (11pts), and AKBL (10pts).

Foreign buying continued this week, clocking in at USD 2.9mn compared to a net buy of USD 5.2mn last week. Major buying was witnessed in All other sectors (USD 3.7mn) and Commercial Banks (USD 1.5mn). On the local front, Individuals reported selling (USD 6.2mn) followed by Insurance Companies (USD 1.6mn). Average volumes arrived at 338mn shares (down by 3.3% WoW), while the average value traded settled at USD 45mn (down by 6.3% WoW).

Other major news: i) Indus Motor to invest Rs3 billion in localising Toyota parts, ii) Nishat Group seeks inclusion of its two plants in IGCEP, iii) OGDCL agrees to pay Rs12.6bn royalty to Balochistan, iv) NEPRA allows PEL-EPQL gas deal at $5.6127/MMBTU, and v) IGI Insurance to buy 6% stake in Packages from Stora Enso..

Outlook and Recommendation

A new government will be formed next week, bolstering the ongoing positive sentiment. Moreover, the result season will continue in the next week, where certain scrips are anticipated to be in the limelight amid the expectation of robust results. In addition to this, scrips are trading at attractive valuations, which could entice investors. Hence, the market momentum is projected to be upbeat. Our preferred stocks are OGDC, PPL, MARI, MCB, UBL, MEBL, FABL, HBL, LUCK, MLCF, FCCL, FFC, HUBC, PSO and INDU. The KSE-100 is currently trading at a PER of 4.2x (2024) as compared to its 5-year average of 5.9x, offering a dividend yield of ~10.8% as compared to its 5-year average of ~6.0%.

Courtesy: AHL Research

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