The market sentiment remained predominantly positive this week, bolstered by significant developments on the economic and political front. On the political front, the Election Commission of Pakistan has announced that the general elections in the country would be held in the last week of Jan’24, effectively settling uncertainty in the market. Moreover, in the latest treasury bills, the auction cut-off yield declined by 217 basis points for various tenors. In addition to this, the PKR exhibited a consistent appreciation trend over the week. PKR closed against USD at 291.76, gaining PKR 5.1|+1.7% WoW, this led to an increase in confidence among market participants, reinforcing their positive outlook on the market. Moreover, last week, SBP’s reserves increased by USD 56mn, reaching USD 7.7bn. The market closed at 46,421 points, increasing by 668 points | +1.5% WoW.
Sector-wise positive contributions came from i) Commercial Banks (202pts), ii) Power Generation and distribution (111pts), iii) Oil and gas Exploration Companies (96pts), iv) Chemical (77pts), and v) Pharmaceutical (31pts). Meanwhile, the sectors which mainly contributed negatively were Technology & Communication (14pts), and ii) Fertilizer (7pts). Scrip-wise positive contributors were UBL (106pts), HUBC (103pts), COLG (59pts), MCB (49pts), and PPL (35pts). Meanwhile, scrip-wise negative contributions came from SYS (28pts), ENGRO (20pts), UPFL (10pts), CHCC (9pts), and BAFL (9pts).
Foreigner buying was witnessed this week, clocking in at USD 0.29mn compared to a net sell of USD 9.67mn last week. Major buying was witnessed in Commercial Banks (USD 1.69mn) and Technology and Communication (USD 1.3mn). On the local front, selling was reported by Insurance Companies (USD 1.35mn) followed by Banks / DFIs (USD 1.21mn). Average volumes arrived at 139mn shares (down by 13% WoW) while the average value traded settled at USD 15.4mn (down by 25% WoW).
Other major news: i) SNGPL removes 323 illegal connections, recovers over Rs75.4m, ii) Auto financing drops for 14th straight month in August, iii) OGDCL discovers gas in Punjab iv) Hydropower surge cuts electricity cost by nearly a fifth to Rs8.27/KWh in August and v) LCI to acquire approx. 75.01pc shareholding of Lotte Chemical Ltd.
Outlook and Recommendation
Market participants are advised to pay close attention to economic news as it will influence the market overall. Given the IMF’s persistent call for gas price adjustments to address the circular debt issue, the caretaker government is expected to implement gas price hikes in the upcoming week. Our preferred stocks are OGDC, PPL, MARI, MCB, UBL, MEBL, LUCK, MLCF, ENGRO, FFC, HUBC, and INDU. The KSE-100 is currently trading at a PER of 3.6x (2024) as compared to its 5-year average of 5.7x offering a dividend yield of ~11.7% as compared to its 5-year average of ~6.8%.
Courtesy – AHL Research