Market Commentary
The market commenced on a negative note, given mounting concerns over the current account. Moreover, the recent depreciation of Pak Rupee against USD (closing at PKR 164) kept the momentum weak. During the week, the market bounced back and cushioned the dip amid robust financial results of some scrips, massive incentives approved by the Federal Govt. for the technology and telecom sector, strong remittances (USD 2.7bn in Jul’21) and 114% YoY surge in automobile sales in Jul’21. Albeit, the KSE-100 closed at 47,170 points, shedding 320 points (down by 0.7%) WoW.
Sector-wise negative contributions came from i) Cement (112pts), ii) Oil & Gas Marketing Companies (67pts), iii) Oil & Gas Exploration (52pts), iv) Power Generation & Distribution (41pts) and v) Fertilizer (39pts). Whereas, the sectors that contributed positively included i) Technology & Communication (47pts) and ii) Food & Personal Care Products (37pts). Scrip-wise negative contributors were LUCK (43pts), PPL (32pts), HUBC (32pts), PSO (32pts) and OGDC (31pts). Meanwhile, scrip-wise positive contribution came from TRG (83pts), MEBL (46pts), and FCEPL (44pts).
Foreign buying continued this week, clocking at USD 4.0mn against a net buy of USD 3.1mn last week. Buying was witnessed in Technology (USD 4.2mn), Banks (USD 0.9mn) and Fertilizer (USD 0.3mn). On the domestic front, major selling was reported by Insurance (USD 6.6mn) and Individuals (USD 3.0mn). Average volumes clocked-in at 307mn shares (down by 33% WoW) while average value traded settled at USD 73mn (down by 14% WoW).
Other major news: i) Services exports grow by 9.19pc to $5.937bn, ii) Lucky gets permission to set up assembly plant for Samsung mobile devices, iii) K-Electric signs 150mmcfd RLNG supply deal with PLL, and iv) Textile exports up by 21pc in FY21.
Outlook and Recommendation
We anticipate the market to be positive next week, given the expectation of strong results in the ongoing result season. Meanwhile, concerns over COVID-19 fourth may keep the sentiment skittish. Furthermore, prevailing tension in Afghanistan with the continuing withdrawal of US army by the end of this month may exert pressure on the local bourse. Our preferred stocks are EPCL, PSO, OGDC, HUBC, HBL, FFC, LUCK, ACPL, ENGRO, UBL, SNGP, and NML. The KSE-100 is currently trading at a PER of 6.6x (2021) compared to Asia Pac regional average of 16.0x while offering a dividend yield of ~6.6% versus ~2.4% offered by the region.
Courtesy – AHL Research