We expect market returns to turn positive as Pakistan is fully compliant on FATF’s action plan and an announcement of status is expected in the upcoming week. Moreover, financial aid for flood relief from international financial institutions and friendly countries is expected soon, which should curtail the free fall in PKR. 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 (2023) compared to Asia Pac regional average of 12.5x while offering a dividend yield of ~9.8% versus ~2.8% offered by the region.
The market opened on positive note this week given Saudi Fund of USD 3bn was rolled over till next year while IMF assured support for flood relief and reconstruction. However, the momentum could not sustain owed to bleeding SBP foreign reserves (falling by USD 278mn WoW), which led the Pak Rupee to further depreciate against greenback (closing at PKR 239.65 towards end of the week). In addition to this, the FDI during 2MFY23 plummeted by 26% YoY. Furthermore, the LSM output reported a 1.4% YoY| 16.5% MoM fall in Jul’22. Meanwhile, the investors opted for value buying amid the expectation of receiving USD 1.5bn, USD 0.5bn and USD 0.2bn from ADB, Asian Infrastructure Investment Bank, and the Japanese Government, respectively. Moreover, the World Bank is also expected to give flood-related support of USD 1.7bn. Alongside this, the current account reduced by 54% YoY in Aug’22, which further cushioned the overall decline in the index during the week. The market closed at 40,620 points, shedding 1,059points (down by 2.5%) WoW.
Sector-wise negative contributions came from i) E&P (251pts), ii) Banks (246pts), iii) Cement (123pts), iv) Power (74pts) and v) OMCs (73pts). Whereas, sectors which contributed positively were i) Tobacco (15pts), and Automobile Parts (2pts). Scrip-wise negative contributors were PPL (117pts), OGDC (84pts), LUCK (83pts), MEBL (66pts) and HMB (51pts). Meanwhile, scrip-wise positive contribution came from TRG (21pts), PAKT (15pts), UNITY (8pts), FFC (6pts) and IBFL (4pts).
Foreigners buying continued this week, clocking in at USD 5.09mn compared to a net buy of USD 13.8mn last week. Major buying was witnessed in Technology (USD 6.6mn), E&P (USD 0.5mn), Cement (USD 0.5mn) and OGMCs (USD 0.3mn). On the local front, selling was reported by Insurance (USD 3.3mn) followed by Mutual Funds (USD 2.4mn). Average volumes clocked in at 166mn shares (down by 9% WoW) while average value traded settled at USD 26mn (down by 13% WoW).
Other major news: i) Javedan Corp to list Globe Residency REIT, ii) Govt to give subsidised seeds, fertilisers to flood-hit farmers, iii) Petrol price raised by Rs1.45 per litre,iv) Auto financing falls 2.2pc MoM to Rs353 billion in Aug’22.
Courtesy – AHL Research