PSX past week and market on Monday

The week commenced on a positive note as Russia and Ukraine entered negotiations; however things turned for the worse as talks broke down, which caused global crude oil prices to soar past USD 114/bbl. Moreover, an announcement of an industrial package triggered buying mid-week, albeit the positive momentum could not sustain for long as the market plummeted over the noise of Russia’s military attack on Ukraine and rising commodity prices. Furthermore, the trade deficit rose to USD 32bn, increasing 82% during 8MCY21 and inflation rose over 12% YoY, which kept the index under pressure as well. The market closed at 44,551 points, rising 567points (up by 1.2%) WoW.

Sector-wise positive contributions came from i) Oil & Gas Exploration Companies (402pts), ii) Technology & Communication (129pts) iii) Fertilizer (95pts), iv) Chemical (24pts) and v) Power Generation & Distribution (19pts). Whereas, sectors which contributed negatively came from i) Cement (67pts), ii) Oil & Gas Marketing Companies (12pts), iii) Insurance (12pts), iv) Automobile Assembler (11pts), and v) Leather & Tanneries (8pts).

Scrip-wise positive contributors were PPL (169pts), OGDC (136pts) TRG (117pts), POL (74) and EFERT (37pts). Meanwhile, scrip-wise negative contribution came from LUCK (39pts), MCB (34pts), PSO (18pts), DGKC (17pts) and DAWH (16pts).

Foreign selling continued this week, clocking-in at USD 0.97mn compared to a net sell of USD 3.24mn last week. Major selling was witnessed in E&P’s (USD 1.5mn) and Banks (USD 1.4mn). On the local front, buying was reported by Banks (USD 2.4mn) followed by Brokers (USD 2.1mn). Average volumes clocked-in at 215mn shares (down by 5% WoW) while average value traded settled at USD 43mn (up by 12% WoW).

Other major news: i) Next three days crucial, says Fazl about no-trust move, ii)Ogra hikes gas prices, iii) Jul-Feb trade deficit widens 82.2pc to $31.959bn YoY, iv) First cargo under Saudi oil facility due late March, v) OMCs’ sales increase by 10% YoY in February, vi) Uzbek President to discuss trans-Afghan railway project: FO, and vii) Nepra approves some adjustments in KE tariff.

Outlook and Recommendation

We believe the market will remain jittery in the short term because of geopolitical tensions and rising commodity prices. Key events to look out for include MPC meeting, FATF decision, and an ongoing IMF review which will have an impact on the market.

Keeping in view the ongoing result season, certain sectors and scrips are expected to stay under the limelight. We advise investors to prioritize long term blue chip scrips only.

Our preferred stocks are OGDC, PPL, MARI, HBL, MCB, UBL, MEBL, FABL, LUCK, FCCL, ENGRO, FFC, HUBC, PSO, INDU, ILP, EPCL, and ASTL. The KSE-100 is currently trading at a PER of 5.0x (2022) compared to Asia Pac regional average of 13.5x while offering a dividend yield of ~8.8% versus ~2.4% offered by the region.

Courtesy – AHL Research

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