The KSE-100 index experienced a bullish week, driven by anticipation of USD 7bn approval from the IMF Executive Board, for which a meeting is scheduled for Sep’25. Moreover, the 50bps FED rate cut boosted market participation across Asian markets, including local bourses. Large Scale Manufacturing Industries (LSMI) output witnessed an increase of 2.4% YoY during Jul-24, while it decreased by 2.1% on an MoM basis. Furthermore, the country posted a current account surplus of USD 75mn(surplus after four months) for Aug’24. Additionally, all bids in the T-Bill auction were rejected.
Moreover, the PIB auction witnessed a significant rate reduction, ranging from 190-335bps across all tenors. SBP reserves increased by USD 43mn, reaching USD 9.5bn. Furthermore, the Pak Rupee appreciated against the USD by 0.12%, reaching 277.8. The market closed at 82,074 points, marking an increase of 2,741 points | 3.5% WoW.
Sector-wise positive contributions came from i) Commercial Banks (1,139pts), ii) E&P (637pts), iii) Fertiliser (631pts), iv) Cement (161pts) and v) OGMCs (74pts). Meanwhile, the sectors that mainly contributed negatively were i) Refinery (30pts), ii) Engineering (29pts), and iii) Glass & Ceramics (24pts). Scrip-wise positive contributors were MARI (567pts), FFC (324pts), MEBL (304pts), EFERT (287pts), and MCB (278pts). Meanwhile, scrip-wise negative contributions came from NBP (33pts), PPL (29pts), DGKC (27pts), FFBL (23pts), and TGL (22pts).
Foreigner selling continued this week, clocking in at USD 23.mn compared to a net sell of USD 7.5mn last week. Major selling was witnessed in Fertilizer (USD 9.8mn), E&P’s (USD 6.1mn) and Banks (USD 2.8mn). On the local front, buying was reported by Mutual Funds (USD 15.5mn) followed by Individuals (USD 4.4mn) and Banks (USD 3.3mn). Average volumes arrived at 469mn shares (down by 22.6% WoW), while the average value traded settled at USD 66mn (up by 20.9% WoW).
Other major news: i) Basmati price: Rice export boom ends after India’s move ii) Pakistan’s power generation falls sharply amid rising costs, solarisation iii) Deregulating Pakistan’s oil challenges, iv) Foreign-funded projects: EAD seeks Rs196bn more to cover rupee deficit and v) ‘PCGA reports dramatic 64pc drop in cotton arrivals, hitting 40-year low.
Outlook and Recommendation
We expect the market to maintain its upward trajectory, capitalizing on the momentum gained by the end of this week and further boost to come from approval of EFF facility by IMF. Moreover, with the ongoing result season, certain scrips are anticipated to be in the limelight amid the expectation of robust results. 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 4.1x (2025) compared to its 5-year average of 5.9x offering a dividend yield of ~10.5% compared to its 5-year average of ~8.2%.
Courtesy – AHL Research
