Political uncertainty took a toll on the market this week. The Pak Rupee continued to depreciate during the week, reaching an all-time low of PKR 228.37 amid depletion of foreign reserves and uncertainty over funding from friendly countries. Moreover, IMF is assessing which friendly countries are willing to provide financial aid to Pakistan before disbursing the loan of USD 1.2bn. Given the situation, the pressure was felt by the market, taking the index below 40,000 points. In addition to this, Fitch downgraded Pakistan’s rating outlook to negative. However, a slight rebound was observed on the last trading day. The market closed at 40,077points, losing 1,998 points (down by 4.75%) WoW.
Sector-wise negative contributions came from i) Commercial Banks (499pts), ii) Fertilizer (294pts), iii) Cement (245pts), iv) Oil & Gas Exploration Companies (187pts) and v) Power Generation & Distribution (110pts). Whereas, sectors which contributed positive were i) Sugar & Allied Industries (3pts) and ii) Close-End Mutual Fund (2pts). Scrip-wise negative contributors were HBL (152pts), LUCK (92pts), ENGRO (92pts), EPCL (91pts) and HUBC (90pts). Meanwhile, scrip-wise positive contribution came from SML (3pts), HGFA (2pts), HINOON (2pts), MUREB (1pts) and DCR (1pts).
Foreign buying was witnessed this week, clocking in at USD 3.43mn compared to a net buy of USD 1.40mn last week. Major buying was witnessed in Technology (USD 1.98mn) and All Other Sectors (USD 0.75mn). On the local front, selling was reported by Mutual Funds (USD 7.76mn) followed by Insurance Companies (USD 2.22mn). Average volumes clocked in at 163mn shares (down by 8% WoW) while average value traded settled at USD 21mn (down by 31% WoW).
Other major news: i) FY22 FDI surges 2.6pc to $1.868bn, ii) SBP reserves fall to $9.329bn on debt repayments, iii) Pakistan international bond yields surge to 50.6%, iv) Large-scale manufacturing expands 11.7pc in 11MFY22, and v) Kohala Hydropower Project: PPIB extends due financial close date by 3 years.
Outlook and Recommendation
The market is expected to be positive in the upcoming week. With the commencement of result session next week, certain scrips are expected to remain in the limelight. Moreover, scrips are trading at cheap valuations, which may revive the momentum. We recommend the investors to cherry-pick blue chip scrips. Our preferred stocks are OGDC, PPL, MARI, MCB, FABL, MEBL, BAFL, LUCK, MLCF, FCCL, ENGRO, FFC, HUBC, PSO, HUMNL and SNGP. The KSE-100 is currently trading at a PER of 4.1x (2022) compared to Asia Pac regional average of 12.2x while offering a dividend yield of ~9.6% versus ~2.9% offered by the region.
Courtesy – AHL Research