The market commenced on a positive note this week. However, sentiments turned negative amid plunge in international oil prices during the mid-week. Furthermore, pressure from downturn in international markets owing to concerns over a possible second wave of COVID-19 was also felt in local bourse. With monetary aid received during the week from ADB and World Bank worth USD 1bn followed by current account turning surplus with USD 13mn in May’20, sentiments shifted towards green side. Along with this, SBP’s announcement of 100 bps cut provided further fuel to sentiment. Furthermore, extension in FATF’s deadline also provided breather to investors. The market settled at 33,939 points, gaining 501 points (up by 1.5%) WoW.
Sector-wise positive contributions came from i) Fertilizer (326pts), ii) Cements (108pts), iii) Power Generation & Distribution (46pts), iv) Oil & Gas Marketing Companies (34pts) and Auto Assemblers (31pts). However, sector-wise negative contribution came from i) Commercial Banks (90pts), ii) Tobacco (13pts) and iii) Pharmaceuticals (8pts). Scrip-wise positive contributions were led by FFC (101pts), ENGRO (95pts), DAWH (78pts), EFERT (47pts) and HUBC (44pts).
Foreign selling continued this week clocking-in at USD 9.9mn compared to a net sell of USD 4.8mn last week. Selling was witnessed in Fertilizer (USD 2.7mn) and Commercial Banks (USD 2.6mn). On the domestic front, major buying was reported by Insurance Companies (USD 7.0mn) and Mutual Funds (USD 3.4mn). Average Volumes settled at 177mn shares (down by 23% WoW) while average value traded clocked-in at USD 35mn (down by 16% WoW).
Other major news: i) 61 healthcare items exempted from duties, sales tax, ii) PSO invites bids for supply of HSFO, motor oil, iii) Rs112.1bn raised from PIBs, iv) Diamer Basha Dam project may get off the ground in July, and v) Cabinet approves furnace oil imports for KE.
Outlook and Recommendation
We expect the market to remain positive in the upcoming week. Since COVID-19 cases have started to decline day-on-day basis, investment sentiment is expected to improve. With inflow of funds from ADB and World Bank, PKR/USD parity is expected to stabilize in the upcoming week. With monetary policy announced we expect investors to cherry pick scrips from Cements, OMCs and Fertilizers sector. Our preferred stocks OGDC, MCB, HUBC, ENGRO, FFC, LUCK, DGKC, KOHC and ACPL. The KSE-100 index is currently trading at a PER of 7.2x (2020) compared to Asia Pac regional average of 12.6x and while offering DY of ~6.5% versus ~2.8% offered by the region. (AHL Research).