The market commenced on a positive note this week with news of progress on circular debt. Additionally, the market remained in green zone since Pakistan secured over USD 10 bn in pledges from international financial institutions and the UAE agreed to lend USD 1bn to Pakistan and roll over an existing USD 2bn loan. However, uncertainty prevailed towards the week due to political concerns. Moreover, foreign exchange fell another USD 1.2bn to USD4.3bn,lowest level of SBP-held reserves since February 2014. The large drop in Forex reserves was due to external debt repayment. In addition, PKR depreciated by PKR 1.01 | 0.4% WoW against USD, closing the week at 228.14. The index closed at 40,323 points, shedding 684points (down by 1.7%) WoW.
Sector-wise negative contributions came from i) Commercial Banks (222pts), ii) Fertilizer (132pts), iii) Technology & Communication (132pts), iv) Pharmaceuticals (59pts) and v) Oil & Gas Exploration Companies (35pts). Whereas, the sectors which contributed positively were i) Miscellaneous (68pts), ii) Automobile Assembler (39pts), iii) Insurance (6pts), iv) Automobile Parts & Accessories (3pts) and v) Paper & Board (3pts). Scrip-wise negative contributors were TRG (107pts), ENGRO (55pts), BAHL (54pts), MEBL (37pts) and MCB (33pts). Meanwhile, scrip-wise positive contribution came from PSEL (73pts), MTL (54pts), LOTCHEM (15pts), NESTLE (15pts) and JVDC (7pts).
Foreigners buying continued during this week, arriving at USD 1.2mn compared to a net buy of USD 0.3mn last week. Major buying was witnessed in Exploration and Production (USD 0.7mn) and All other sectors (USD 0.6mn). On the local front, selling was reported by Mutual Funds (USD 4.7mn) followed by Banks/DFIs (USD 4.5mn). Average volumes clocked in at 183mn shares (up by 4% WoW) while average value traded settled at USD 27mn (up by 16% WoW).
Other major news: i) Export of services goes up 6pc in July-Nov, ii) Oil & gas sector: Plan to deal with Rs1,500bn circular debt soon, iii) Pakistan repays over $1bn external debt, and iv) Deal signed with SFD to finance oil derivatives worth $1bn.
Outlook and Recommendation
The equity bourse is expected to remain range bound in the upcoming week as market participants will remain cautious due to the political noise in the country. Furthermore, any positive news coming from friendly countries or IMF 9th review will benefit the market. Our preferred stocks are OGDC, PPL, MARI, MCB, FABL, MEBL, BAFL, LUCK, MLCF, FCCL, ENGRO, FFC, HUBC, PSO, SNGP and HUMNL. The KSE-100 is currently trading at a PER of 3.9x (2023) compared to Asia Pac regional average of 11.7x while offering a dividend yield of ~10.5% versus ~3.0% offered by the region.
Courtesy- AHL Research