The market experienced subdued activity throughout the week, primarily due to the prevailing uncertainty surrounding the completion of the ninth review of the International Monetary Fund (IMF) program. On the economic front, Pakistan recorded a current account surplus of USD 255mn in May 2023, compared to a surplus of USD 78mn in Apr’23. Additionally, the government raised over PKR 2.4trn through the auction of T-bills. SBP-held forex reserves fell by USD 482mn WoW to USD 3.5bn. in addition, the PKR appreciated against the USD by PKR 0.46 (0.16%) on a week-on-week basis, closing the week at 286.74/USD. Overall, the market closed at 40,065 points, down by 1,236 points (-3.0%) on a week-on-week basis.
Sector-wise negative contributions came from i) Commercial Banks (214pts), ii) Fertilizer (194pts), iii) Technology & Communication (181pts), iv) Chemical (114pts), and v) Oil & Gas Exploration Companies (109pts). Whereas, the sector which contributed positively was Tobacco (14pts). Scrip-wise negative contributors were ENGRO (91pts), SYS (79pts), COLG (77pts), TRG (73pts), and UBL (66pts). Meanwhile, scrip-wise positive contributions came from SHEL (16pts), PAKT(14pts), UPFL (12pts), AGP (7pts), and MTL (7pts).
Foreigner buying was witnessed during this week, clocking in at USD 2.9mn compared to a net sell of USD 0.7mn last week. Major buying was witnessed in All Other Sectors (USD 1.2mn) and Banks (USD 1.0mn). On the local front, selling was reported by Brokers (USD 7.7mn) followed by Mutual Funds (USD 5.4mn). Average volumes arrived at 131mn shares (down by 19% WoW) while the average value traded settled at USD 13mn (down by 8% WoW).
Other major news: : i) SBP gets $1bn from China, ii) Release of Rs703.6bn funds authorized for uplift projects, iii) FDI plunges 21pc in 11 months, and iv) KE tariff goes up by Rs1.52 per unit as payables surge to Rs592bn.
Outlook and Recommendation
Next week, the market will have limited trading days due to the upcoming Eid holidays. Moreover, the market will be closely monitoring the progress of the ninth review of the IMF program. As this program is reaching its conclusion by the end of the week, it will be a critical period to determine whether the ninth review will be successfully concluded or not. Our preferred stocks are OGDC, PPL, MARI, MCB, FABL, MEBL, BAFL, LUCK, MLCF, FCCL, ENGRO, FFC, HUMNL, HUBC, PSO, and SNGP. The KSE-100 is currently trading at a PER of 3.3x (2023) compared to Asia Pac regional average of 11.1x while offering a dividend yield of ~12.6% versus ~3.0% offered by the region.
Courtesy – AHL Research