The benchmark equity bourse marked a resurgence during the outgoing month of Sep’23. At the onset of the month, the caretaker PM informed that KSA is expected to invest USD 25bn in Pakistan, which elated the market sentiment. Moreover, the PKR witnessed a strong comeback with a sharp appreciation after a crackdown against foreign currency smuggling was initiated. Hence, Pak Rupee closed at PKR 287.74 (after reaching lowest level of PKR 307.10 at the start of the month) against greenback, gaining PKR +17.80 |+5.83% MoM (making Pak Rupee the World’s Best-Performing currency in Sep’23). Moreover, the SBP kept the policy rate unchanged at 22% at MPC (beating the market consensus of hike). The current account deficit in Aug’23 shrank by 79% YoY amounting to USD 160mn. On the political front, the ECP announced that the general elections in the country would be held in the last week of Jan’24. KSE-100 index closed at 46,233 points, gaining 1,230 points | 2.7% MoM.
Major News
Govt hikes petrol price by nearly Rs15, HSD by Rs18, IMC to launch Corolla Cross hybrid to revive market, PTCL informs PSX it’s making sizable investment in telecom sector, The Organic Meat Company Secured Export Contract of Boneless Beef to UAE, Pakistan to receive $77mn for flood resilience, Sunridge acquires 37,123,188 voting shares of Al Shaheer, Pakistan public debt surges 22pc to Rs61.75tr in July, SBP reserves dip to $7.8bn, down $70m on debt repayment, Wapda’s hydro tariff increased by 29pc, SIFC identifies 9 power projects worth $6.87bn, IFC commits $1.5bn in short, long-term investments, import value of Afghan-origin coal declines to $95 PMT, SNGPL removes 323 illegal connections, recovers over Rs75.4m, Auto financing drops for 14th straight month in August, OGDCL discovers gas in Punjab, Hydropower surge cuts electricity cost by nearly a fifth to Rs8.27/KWh in August, LCI to acquire approx. 75.01pc shareholding of Lotte Chemical Ltd, Engro Corporation to sell some thermal energy assets, EPCL extends gas supply deal with SSGC till October 15, Indus Motor halts production for 12 days on supply shortages, Cement exports surge by over 130 percent to $39.6 mn, and Pakistan’s NRL plans to boost low-sulphur fuel oil output for ships.
Outlook and Recommendation
The market participants are expected to closely monitor progress on economy and any update on the impending gas tariff adjustment in Oct’23, as they will have a crucial influence on steering the market’s trajectory. Furthermore, the scheduled monetary policy announcement by the State Bank of Pakistan (SBP) on 30th Oct’23, could have a notable influence on the market’s momentum.
The YoY headline inflation for Sep’23 is expected to be 31.1%, showing an uptick from the previous month, Aug’23, which had a YoY inflation rate of 27.4%.In the meantime, it is expected that inflation will remain at elevated levels in the coming months due to the effects of recent increases in food prices, power tariffs, and budgetary measures. Looking forward, the primary factors posing risks to overall inflation include the potential for sustained pressure on both food and energy prices, alongside an imminent adjustment in gas tariffs. It’s important to note that the strengthening of the PKR against the U.S. dollar is expected to play a mitigating role, offering some relief from inflationary pressures.
Furthermore, the earnings season for the 1QFY24 and the 3QCY23 is will commence from Oct’23, where we expect announcement of robust earnings from major companies and sectors. This is likely to keep specific stocks in the limelight.
The KSE-100 is currently trading at a PER of 3.6x (2024) as compared to its 5-year average of 5.7x offering a dividend yield of ~11.7% as compared to its 5-year average of ~6.8%. Our preferred stocks are OGDC, PPL, MARI, MCB, UBL, MEBL, LUCK, MLCF, ENGRO, FFC, HUBC, and INDU.
Courtesy- AHL Research