The market experienced initial pressure due to selling by investors, but several positive economic developments emerged throughout the week. The State Bank of Pakistan (SBP) continued its monetary policy easing cycle, cutting the policy rate by 200bps to 17.5%, a move not seen since Apr’20. As a result, KIBOR rates fell between 25 to 119bps across various tenors, which market participants welcomed. On the international front, there was significant progress regarding Pakistan’s IMF program, as the country’s name was officially added to the IMF board’s meeting agenda for 25th Sep’24. In addition, SBP reserves increased by USD 30, reaching USD 9.5bn. Furthermore, the Pak Rupee appreciated against the USD by 0.15% at 278.2. The market closed at 79,333 points, marking an increase of 435 points or 0.55% WoW.
Sector-wise positive contributions came from i) Fertilizer (161pts), ii) Cement (159pts), iii) E&P (92pts), iv) Leather (74pts) and v) Pharmaceutical (54pts). Meanwhile, the sectors that mainly contributed negatively were i) Commercial Banks (119pts), ii) Automobile (115pts), and iii) Power Generation (80pts). Scrip-wise positive contributors were EFERT (121pts), OGDC (100pts), SRVI (74pts), UBL (69pts), and LUCK (66pts). Meanwhile, scrip-wise negative contributions came from MTL (115pts), MEBL (85pts), MARI (85pts), HUBC (81pts), and HBL (78pts).
Foreigner selling continued this week, clocking in at USD 7.5mn compared to a net sell of USD 6.7mn last week. Major selling was witnessed in Fertilizer (USD 3.7mn) and Banks (USD 2.9mn). On the local front, buying was reported by Individuals (USD 7.2mn) followed by Mutual Funds (USD 4.8mn) and Companies (USD 4.4mn). Average volumes arrived at 606mn shares (down by 10.2% WoW), while the average value traded settled at USD 55mn (up by 4.7% WoW).
Other major news: i) Rs20bn Green Sukuk likely in Dec ii) Oil prices sink below $70 for the first time since Dec 2021 iii) Remittances surge 44pc YoY to $5.9bn in July-August FY25, reach $2.9bn in August, iv) Jul-Aug borrowing drops 58pc to Rs660.3bn YoY and v) ‘EVs will capture 50pc auto market by 2030’.
Outlook and Recommendation
We anticipate the market will sustain its positive momentum, building on the gains seen at the end of this week. This outlook is supported by easing inflationary pressures, largely driven by a decline in international oil prices. Moreover, with the ongoing result season, certain scrips are anticipated to be in the limelight amid the expectation of robust results. Our preferred stocks are OGDC, MCB, UBL, 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
