PSX past week and strategy for Monday

Local political climate and global geopolitics continue to have its footprint on KSE-100 where the week started with heightened local political tensions taking a toll on the market and KSE-100 going down by 1.8% in the first session. Even positive news on economic front could not prevent the aforementioned sell-off as current account deficit for Feb’22 declined to USD0.5bn against USD2.5bn in Jan’22. However, a relief rally was witnessed the next day as resolution of Reko Diq issue provided optimism to the market.

Overall, in the next few sessions, market remains uncertain with thin volumes where build up to the no-confidence and heightened political noise kept investors at bay. Resultantly, market closed the week at 43,551pts, up 1.21%WoW however average daily volume decreased by 17.3%WoW to 143.7mn shares.

Other major news flows during the week were, i) International Monetary Fund (IMF) seeking more details of financing of petroleum levy and electrify prices reduced under Prime Minister Relief Package, ii) Large industries of Pakistan posting 7.6% growth in 7MFY22, iii) The National Electric Power Regulatory Authority (Nepra) notifying PkR5/unit reduction in electricity rates, iv) Organisation of Islamic Cooperation (OIC) meeting for the 48th session being hosted by Pakistan., v) Yields of Market Treasury Bills (MTBs) increasing in the latest auction, and vi) Islamabad and Moscow are in talks to a multi-billion dollar government-to-government import deal.

Refinery sector remained among the top performers as news suggested Saudi Arabia is exploring to invest in Pakistan Refinery’s upgradation projected which spurred investor interest across the whole sector.

Fertilizer also performed 2.9% for the week as increasing urea prices globally and locally improved future earnings potential of the sector. Automobile parts and accessories declined by 1.6% for the week as depreciating currency and increasing steel prices pressurized the sector. Stock wise, top performers were, i) FFBL (+7.4%WoW), ii) TRG (+6.7%WoW), iii) EPCL (+6.2%WoW), iv) AVN (+5.3%WoW), and v) LUCK (+5.3%WoW), while laggards were, i) BOP (-10.3%WoW), ii) BNWM (-5.0%WoW), iii) THALL (-4.7%WoW), iv) SHFA (-4.7%WoW), and v) JSCL (-3.6%WoW). Flow-wise, Banks/DFIs and foreigners were the net sellers, offloading US$4.12mn and US$4.59mn, respectively which was majorly absorbed by mutual funds with a net buy of USD5.33mn and individuals being net buyers with USD2.63mn.

Outlook

The political uncertainty amidst the no confidence vote will continue to steer the market. Similarly, the market will watch the movement of global commodities very closely and will react accordingly. Additionally, news flows related to ongoing IMF review would also dictate market sentiments in the coming weeks, warranting a closer look. Hence, we advocate for gradual accumulation in fundamental scrips with a longer term focus. We prefer Banks (on possible further monetary tightening by the Central Bank), select-Techs (SYS, AVN) and other select-value stocks (LUCK etc.). We also like Fertilizers (FFC & EFERT) on the back of recent hikes in urea prices.

Courtesy- AKD Research

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