The local bourse continued its bullish momentum this week, settling at 43,741 points (up 2.3% WoW). This week the index also crossed a 2.5-Yr high and now stands at the highest level during the present government’s tenure. US FDA’s finding of Moderna’s vaccine as “highly effective” was a big step closer to the approval of another vaccine (after Pfizer/BioNTech’s vaccine) – a significant boon for global investment sentiment. This week Pakistan paid its second instalment of the USD 3bn loans from Saudi Arabia, through commercial borrowing from China. Moreover, POL products’ prices were raised this week (up to 7.9%) on the back of a recovery in global oil prices (Arab Light is up ~19% MoM).
Sector-wise positive contributions came from i) Banks (342pts), ii) Fertilizers (231pts), and iii) Oil & Gas Exploration (202pts) while Power Generation & Distribution declined 37pts. Scrip-wise positive contributions were led by OGDC (112pts), FFC (95pts), MEBL (68pts), ENGRO (64pts), and PSO (63pts). HUBC and KOHC led the negative contributions, declining 43 and 15 points respectively.
This week’s foreign selling continued clocking-in at USD 9.4mn compared to a net sell of USD 9.6mn last week. Selling was witnessed in Commercial Banks (USD 11.0mn) and Fertilizer (USD 1.4mn). Significant buying was reported by Banks / DFIs (USD 7.1mn and Individuals (USD 5.1mn) on the domestic front. Average volumes arrived at 549mn shares (up by 22% WoW) while average value traded settled at USD 154mn (up by 25% WoW).
Other major news: i) Pakistan returns $1 billion of Saudi Arabia’s soft loan, officials say, ii) Operations of two fertilizer plants allowed by the cabinet, iii) Govt to grant LNG terminals’ capacity to the private sector, iv) LSM output grows 3.95pc during October, and v) POL products’ prices see significant rice.
Outlook and Recommendation
The index is expected to continue extending its bull run on the back of diluting political noise. Moreover, the approval of Moderna’s vaccine is expected any time soon, which is another leap forward in the battle against COVID-19. Healthy corporate earnings are expected during 2QFY21, which should continue fueling the positive sentiments. Our top picks are OGDC, HUBC, HBL, MCB, FFC, LUCK, ENGRO, ILP, and NML. The KSE-100 index is currently trading at a PER of 7.4x (2021) compared to the Asia Pac regional average of 14.1x and offering DY of ~6.1% versus ~2.4% provided by the region.
Reported by AHL Research