The market commenced on a negative note this week following the FY21 budget announcement which once again included highly ambitious revenue targets. However rise in international oil prices (benefitting E&P) and news regarding breakthrough in discovery of drug for treating COVID-19 patients, improved investor sentiment briefly. The sentiment was short lived as re-introduction of a “smart lockdown” by sealing off hotspots in cities adversely affected sentiment in the bourse. Moreover fall in large scale manufacturing data by 41.89% YoY during Apr’20 and Pak Rupee depreciation against USD to PKR 167.40/USD further dented confidence. The market settled at 33,439 points, shedding 1,172 points (down by 3.4%) WoW.
Sector-wise negative contributions came from i) Commercial Banks (293pts), ii) Fertilizer (226pts), iii) Cement (183pts), iv) Oil & Gas Marketing Companies (96pts) and Power Generation & Distribution (91pts). Whereas, sector-wise positive contribution came from i) Pharmaceuticals (9pts) and ii) Textile Spinning (3pts). Scrip-wise negative contributions were led by UBL (94pts), LUCK (92pts), ENGRO (74pts), FFC (68pts) and HUBC (65pts).
Foreign selling continued this week clocking-in at USD 4.8mn compared to a net sell of USD 7.7mn last week. Selling was witnessed in Fertilizer (USD 2.4mn) and Commercial Banks (USD 1.9mn). On the domestic front, major buying was reported by Individuals (USD 12.3mn) and Broker Proprietary Trading (USD 0.5mn). Average Volumes settled at 229mn shares (up by 1% WoW) while average value traded clocked-in at USD 42mn (down by 16% WoW).
Other major news: i) Textile exports surge 86pc in May as lockdown eases, ii) Amazon asked to register 38 exporters from Pakistan, iii) Public debt swells to Rs34.3trln in July-April, iv) Oil imports dip 74pc to three-month low, and v) Banks resilient to Covid-19 according to SBP.
Outlook and Recommendation
We expect the market to be positive in the upcoming week. The political noise is expected to settle down as the government is making efforts to mend ties with the coalition partners. Moreover, rise in international oil prices is expected to fuel interest in E&P’s. Our preferred stocks are OGDC, HUBC, HBL, BOP, MCB, FFC, LUCK, ENGRO, NML, ILP, KOHC, and ACPL. The KSE-100 index is currently trading at a PER of 7.1x (2020) compared to Asia Pac regional average of 12.6x and while offering DY of ~6.6% versus ~2.8% offered by the region. (AHL).