The market commenced on a positive note this week since the government was able to convince TLP to call off its protest at the capital. Moreover, rebound in Pak Rupee against greenback (settling at PKR 170.01), substantial reduction in international coal prices (down by 34% WoW) and narrowing of trade deficit on a month-on-month basis by 10% further strengthened the sentiment. PM Khan’s announcement of PKR 120bn subsidy package on essential food items further kept the momentum robust. Though profit-taking was witnessed briefly in few scrips but the sentiment remained unchanged. Albeit, the KSE-100 index closed at 47,296 points, climbing up by 1,111 pts (up by 2.4% WoW).
Sector-wise positive contributions came from i) Technology (490pts), ii) Fertilizer (136pts), iii) Refinery (115pts), iv) OMC’s (36pts), and v) Textile Composite (33pts). Whereas, sectors which contributed negative were i) Textile Weaving (14pts), and ii) Paper & Board (9pts). Scrip-wise positive contributors were SYS (241pts), TRG (210pts), MEBL (72pts), NRL (48pts) and FFC (41pts). Meanwhile, scrip-wise negative contribution came from UBL (38pts), LUCK (35pts) and HBL (33pts).
Foreign selling continued this week, clocking-in at USD 11.2mn compared to a net sell of USD 2.7mn last week. Major selling was witnessed in Commercial Banks (USD 5.6mn) and Fertilizer (USD 1.4mn). On the local front, buying was reported by Individual (USD 14.5mn) followed by Insurance Companies (USD 6.5mn). Average volumes clocked-in at 430mn shares (up by 2.4% WoW) while average value traded settled at USD 89mn (up by 121% WoW).
Other major news: i) Foreign exchange reserves reach $23.925bn, ii) Ufone signs Rs21bn syndicated financing for 4G services, iii) Urea sales surge 10pc, v) OGRA cuts local gas producing firms’ sale price and vi) Textile exports hit life-high of $6.04bln in July-Oct
Outlook and Recommendation
We expect the market to remain positive in the upcoming week. With IMF and Pakistan expected to reach agreement soon, the investor sentiment is anticipated to be upbeat. Whereas, current macro-economic concerns such as higher inflationary reading due to jump in petroleum prices could keep the market range-bound. Our preferred stocks are FABL, EPCL, PSO, OGDC, HUBC, HBL, MCB, LUCK, AGHA, FFC, ENGRO, INDU, PTL, SNGP, UNITY, HTL, and ILP. The KSE-100 is currently trading at a PER of 5.0x (2022) compared to Asia Pac regional average of 14.6x while offering a dividend yield of ~8.4% versus ~2.2% offered by the region.
Courtesy – AHL Research