Market Commentary
The local bourse remained under pressure during the week amid political uncertainty and the IMF rejecting the proposal related to curtailment of the stock of circular debt, due to which investor’s confidence was adversely impacted. Furthermore, the caretaker federal cabinet approved a 12.3% weighted average hike in gas prices. Additionally, in Dec’23, large-scale manufacturing industries’ (LSMI) output rose by 3.4% YoY. Also, there was a rise in the prices of petroleum products by PKR 2.73 of MS and PKR 8.37 of HSD. The remittances also surged by 26% YoY to arrive at USD 2.4bn during Jan’24. Moreover, SBP’s reserves increased by USD 12mn, reaching USD 8.1bn. During the week PKR closed at 279.36 against USD, weakening by PKR 0.08 | 0.03% WoW. The market closed at 59,872.96 points, declining by 3,071 points | -4.9% WoW.
Sector-wise negative contributions came from i) Oil & Gas Exploration Companies (1,176pts), ii) Cement (288pts), iii) Power Generation & Distribution (287pts), iv) Oil & Gas Marketing Companies (216pts) and v) Commercial Bnaks (206pts). Meanwhile, the sector which mainly contributed positively was Textile Spinning (3pts). Scrip-wise negative contributors were OGDC (730pts), PPL (377pts), HUBC (221pts), PSO (149pts) and LUCK (117pts). Meanwhile, scrip-wise positive contributions came from EFERT (93pts), MCB (33pts), FATIMA (19pts), NATF (14pts), and AGP (9.24pts).
Foreign buying was witnessed during this week, clocking in at USD 5.2mn compared to a net buy of USD 5.7mn last week. Major buying was witnessed in Exploration & Production (USD 2.2mn) and All other sectors (USD 1.2mn). On the local front, selling was reported by Broker Proprietary Trading (USD 5.9mn) followed by Banks / DFI (USD 2.1mn). Average volumes arrived at 350mn shares (up by 14.5% WoW) while the average value traded settled at USD 48mn (down by 3.6% WoW).
Other major news: i) Govt shares in FWBL likely to be sold to UAE, ii) Govt securities: federal govt borrows less than target, iii) ECC okays Rs6bn Centre share of grant for imported urea iv) PIA, Discos’ sell-off plans, and v) SBP suspends authorisation of three more exchange companies.
Outlook and Recommendation
In the upcoming week, we anticipate clarity on the political front, which will enhance investor’s confidence. Furthermore, with the ongoing result season, particular stocks are anticipated to garner interest owing to their expected robust financial performance. The scripts continue to trade at attractive levels, which could further entice investors. Our preferred stocks are OGDC, PPL, MARI, MCB, UBL, MEBL, FABL, HBL, LUCK, MLCF, FCCL, FFC, HUBC, PSO and INDU. The KSE-100 is currently trading at a PER of 4.1x (2024) as compared to its 5-year average of 5.9x offering a dividend yield of ~11.0% as compared to its 5-year average of ~6.0%.
Courtesy – AHL Research