Despite a 150bps rate cut in the policy rate announced at the beginning of the week, the market remained jittery due to concerns over a significant increase in taxes on capital gains and dividends. As the week progressed, market sentiment shifted positively when it was revealed that the Federal Budget for 2025 included a lower-than-expected increase in the capital gains tax while maintaining the dividend tax. This change spurred bullish activity, leading to a record day-on-day increase of 3,411 points in the index on Thursday. Consequently, the market reached an all-time high of 77,310 points on Friday. Additionally, the SBP raised PKR 1,208bn in T-Bill auction against a target of PKR 780bn, where cut of yield of 3M, 6M and 12M declined by -85bps, -103bps, and -115bps, respectively The SBP reserves depicted a meagre decline of USD 6.2mn | 0.07% Wow to USD 9.1bn. With this, the KSE-100 index closed at 76,707points, witnessing a significant gain of 2,953points | 4.00% WoW.
Sector-wise positive contributions came from i) Commercial banks (1,449pts), ii) Fertilizer (406pts), iii) E&P (362pts), iv) Cement (244pts), and v) Power Generation & Distribution (150pts). Meanwhile, the sectors that mainly contributed negatively were i) Textile Composite (95pts), ii) Chemical (56pts), and iii) Technology & Communication (9pts). Scrip-wise positive contributors were UBL (357pts), MCB (328pts), BAHL (185pts), MEBL (176pts), and BAFL (170pts). Meanwhile, scrip-wise negative contributions came from ILP (99pts), COLG (63pts), PTC (19pts), KEL (17pts), and NBP (11pts).
Foreign selling was witnessed during the week, clocking in at USD 5.8mn compared to a net buy of USD 4.4mn last week. Major sales were witnessed in Exploration & Production (USD 2.7mn) and all other sectors (USD 1.8mn). On the local front, buying was reported by Mutual Funds (USD 11.1mn) followed by Companies (USD 7.9mn). Average volumes arrived at 410mn shares (down by 3.3% WoW), while the average value traded settled at USD 61mn (down by 1.7% WoW).
Other major news: i) Cement industry’s capacity utilization slumps to 17-year low, ii) Oil consumption dips by 7.5pc in July-March, iii) Sazgar reports 3.76x YoY surge in auto rickshaw sales for May 2024, iv) Faysal Islami Exchange Company launches operations in 10 cities, and v) SBP raises Rs90.4bn through PIB-PFL auction.
Outlook and Recommendation
With Eid-ul-Adha falling in the upcoming week, the market will be open for only two trading days, resulting in lower activity. Despite the shortened trading period, investors will closely monitor developments related to the new IMF program. Our preferred stocks are OGDC, MCB, UBL, MEBL, FABL, HBL LUCK, MLCF, FCCL, FFC, HUBC, PSO and SYS. The KSE-100 is currently trading at a PER of 4.4x (2025) compared to its 5-year average of 6.1x, offering a dividend yield of ~10.3% compared to its 5-year average of ~7.3%
Courtesy – AHL Research
