Outlook and recommendation for Pakistan Stocks this week

According to AHL Research, going forward, it is anticipated that the market to remain bullish in the upcoming week amid expectation of relief in the upcoming budget, reduction in duties on imported raw material for construction sector and export oriented sector to spur growth which might keep these sectors in limelight. On the other hand, E&Ps scrips are expected to continue performing well due to higher international oil prices and government shelving divestment plan of E&Ps scrips.

Our preferred stocks are EPCL, PSO, OGDC, HUBC, HBL, MCB, FFC, LUCK, ACPL, ENGRO, UNITY, INDU, UBL and ILP.

The KSE-100 is currently trading at a PER of 7.0x (2021) compared to Asia Pac regional average of 16.3x while offering a dividend yield of ~6.9% versus ~2.6% offered by the region.

The last week trading commenced on a positive note with the index increasing by 182pts on Monday. The uptrend was driven by NAC’s provisional data on GDP growth which is projected at 3.94% in FY21. Optimism at the bourse was further fueled by i) Current account posting a surplus of USD 773mn in 10MFY21, ii) Government cancelling its divestment plan for PPL and OGDC as well as higher oil prices WoW resulting in heavy buying in these scrips, iii) MSCI rebalancing on Thursday resulting in foreign buying, and iv) Pakistan developing a local COVID-19 vaccine. Likewise, technology sector gained traction amid re-rating of sector multiple along with expectation of relief in the upcoming budget resulted in massive activity in the sector. With that said, PSX posted a hat-trick this week (record volumes on three consecutive days).

The KSE-100 index closed at 47,126pts, up by 1,211pts or 2.64% WoW.

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