Next week, the market may see a correction and end the year positively. Furthermore, upcoming elections hold pivotal significance, and their successful conclusion could further elevate investor confidence. We advise investors to retain long-term positions in companies with solid fundamentals while exercising prudence in dealing with fundamentally weak entities through a timely profit-taking approach. Moreover, companies with robust dividend yields, particularly in the Banking, Energy, and Fertilizer sectors, present opportunities for accumulation.
Courtesy – AKD Research
We expect subdued interest from foreign investors in the market owing to long holidays. Additionally, the upcoming week marks a rollover period that investors will closely monitor. Moreover, stocks persistently offer attractive valuations, possibly enticing investors. 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) compared to its 5-year average of 5.9x, offering a dividend yield of ~10.8% compared to its 5-year average of ~6.0%.
Courtesy – AHL Research
Points of concerns
KSE100 dropped 4,425 pts, closing at 61,705 as investors reduced leverage positions and booked profit this week. Moreover, rising political tension after ex-Prime Minister Imran Khan granted bail in the Cypher case, the external financing need of the country to remain high according to Fitch, and IMF pressurising interim government not to grant interim grants before elections hurt the market.
Moreover, increase in international oil prices by USD3.32/bbl. Amid rising tensions in the Middle East, auto financing dropping for the 17th consecutive month, Nepra making power tariff more expensive, and textile exports declining by 5.43%MoM on Nov 23 to USD1.32bn further added negativity.
However, the government shared the 5-year vision to boost trade with China, the government signed USD1.2bn loan agreements for budget support and development, the World Bank approved USD350mn financing to support fiscal competitive reforms in the country and the country posted a current account surplus of USD9mn ending four-month deficit, and FDI surging by 7.28%YoY to USD131mn in Nov23 supported the market.
Moreover, appreciation of PKR against USD by PKR0.73/USD to PKR283/USD, SBP raising PKR320bn from PIB auction, IMC launching Toyota Cross in Pakistan, cotton arrival reaching 8.02mn bales and ECC approving PKR320bn for power sector phasing out circular debt had positive impact on the market.
Courtesy – Spectrum Research