PSX Weekly Update – September 30, 2022

The week commenced on a positive note as the market was up 531.1 points on Monday following the release of SPI number on the last working day, which was 8.8% down WoW. Moreover, the market also reacted positively on the news of the change in Finance Ministry high-ups.

Furthermore, PKR appreciated against the greenback, closing at 228.45 (up by PKR 11 | 4.9% WoW). REER clocked in at 94.5 as of Aug’22 compared to 93.2 in Jul’22. Further, an amount of ~USD 2bn was committed by ADB which is expected to mobilize by the end of this year. On the flip, the market sentiment become negative towards the end of the week as the SBP reserves declined by 4% WoW clocking-in at USD 8bn. In addition, yields on GoP international bonds maturing in 2022 and 2024, increased during the week by 20-24pps WoW. Moreover, with HBL coming under international scrutiny, market sentiment was further dented. Albeit, the market closed 41,129 points, gaining 508points (up by 1.25%).

Sector-wise positive contributions came from i) Power Generation & Distribution (141pts), ii) Cement (107pts), iii) Technology & Communication (92pts), iv) Oil & Gas Exploration (65pts) and v) Fertilizer (40pts). Whereas, sectors which contributed negatively were i) Commercial Banks (217pts), and Close-End Mutual Fund (1pts). Scrip-wise positive contributors were HUBC (139pts), TRG (122pts), PPL (55pts), LUCK (49pts) and OGDC (40pts). Meanwhile, scrip-wise negative contribution came from HBL (213pts), MEBL (34pts), MARI (32pts), SYS (28pts) and BAHL (12pts).

Foreigners buying continued during this week, clocking in at USD 0.15mn compared to a net buy of USD 5.09mn last week. Major buying was witnessed in Technology (USD 2.5mn), Cement (USD 0.2mn), Power Generation & Distribution (USD 0.2mn) and Food & Personal Care Products (USD 0.1mn). On the local front, selling was reported by Mutual Funds (USD 7.6mn) followed by Insurance Companies (USD 3.9mn). Average volumes clocked in at 200mn shares (up by 20% WoW) while average value traded settled at USD 36mn (up by 39% WoW).

Other major news: i) 110 mmcfd gas may be diverted from GTPS to fertilizer plants, ii) PM approves 2,000MW for public sector power projects, iii) $10bn may be sought from China during PM’s visit, iv) Repatriation of profits nosedives by 93pc in two months.

Outlook and Recommendation

With the results season almost over, we expect the market to remain range-bound next week.

Our preferred stocks are OGDC, PPL, MARI, MCB, FABL, MEBL, BAFL, LUCK, MLCF, FCCL, ENGRO, FFC, HUBC, PSO, HUMNL and SNGP. The KSE-100 is currently trading at a PER of 4.2x (2023) compared to Asia Pac regional average of 12.1x while offering a dividend yield of ~9.8% versus ~2.9%.

Courtesy – AHL Research

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