The local bourse opened on a negative note on Monday due to profit-taking witnessed by the investors. Moreover, the country report released by the IMF hinted at keeping the monetary policy tight, dividing the market sentiments regarding interest rates in upcoming policies. However, on Wednesday bulls took over, given Pakistan posted a fourth consecutive monthly Current Account Surplus of USD 334mn in Jun’23. In addition, an announcement of USD 600mn rollover from China further boosted investors’ confidence. The SBP’s reserves (as of 14th Jul’23) climbed up to USD 8.7bn (up by USD 4.2bn WoW), a level last seen during Oct’22, owing to substantial inflows from IMF, KSA, and UAE. The market participants welcomed the jump in SBP reserves, causing the market to cross the 46,000 points level during intraday (previously witnessed on 25th Apr’22) on Friday. Meanwhile, PKR depreciated during the week against USD, closing at PKR 286.81, losing PKR 9.22|-3.21% WoW. Overall, the market closed at 45,921 points, soaring by 853 points (up by 1.9%) WoW.
Sector-wise positive contributions came from i) Banks (768pts), ii) E&Ps (95pts), iii) Food & Personal Care (24pts), and iv) OMCs (22pts). Whereas, the sector which contributed negatively were i) Pharma (33pts), ii) Fertilizer (28pts), and iii) Miscellaneous (19pts). Scrip-wise positive contributors were UBL (308pts), MCB (126pts), MEBL (85pts), BAHL (80pts), and POL (69pts). Meanwhile, scrip-wise negative contributions came from i) ENGRO (31pts), SYS (15pts), CHCC (15pts), PSEL (14pts), and HINOON (12pts).
Foreigner buying continued during the week, settling at USD 5.4mn compared to a net buy of USD 1.0mn last week. Major buying was witnessed in Banks (USD 2.2mn) and E&P (USD 1.2mn). On the local front, selling was reported by Mutual Funds (USD 5.8mn) followed by Other Organizations (USD 1.9mn). Average volumes arrived at 357mn shares (down by 19% WoW) while the average value traded settled at USD 32mn (down by 28% WoW).
Other major news: i) E&P firms sound alarm over cash flow plight, ii) SBP designates D-SIBs for 2023, iii) 216k tonnes of sugar exported in FY23, iv) Govt committed to targeting agri and construction sectors, and v) Textile group exports decline 15pc to $16.501bn YoY.
Outlook and Recommendation
We expect the market in the upcoming 4-day week to remain positive. With the commencement of the result season, certain sectors and scrips are expected to stay under the limelight. Moreover, the government is now seeking new financing opportunities from bilateral and multilateral sources, which if materializes will further boost the market sentiment. 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 3.7x (2024) as compared to its 5-year average of 5.9x offering a dividend yield of ~10.7% as compared to its 5-year average of ~6.6%.
Courtesy – AHL Research