The market commenced on a positive note this week, fuelled by the contraction of the trade deficit by 42% YoY to USD 5.3bn in 1QFY24. Moreover, the expectation of robust results for 1QFY24 kept the market participants vested. The urea and DAP sales witnessed a jump of 11% and 68% YoY, respectively in Sep’23. Furthermore, cement dispatches in 1QFY24 reported a 23% YoY. Moreover, cut-off yields of 3-M T. Bills and 3-Y PIB witnessed a decline of 29bps and 15bps, respectively in the auction held this week. However, inflation climbed up to 31.4% in Sep’23. Meanwhile, the ongoing decline in international oil prices and consistent appreciation of PKR against USD has eased some investor concerns regarding inflation, as both will provide a much-needed cushion. The Pak Rupee closed at PKR 282.69 against the greenback, appreciating by PKR 5.05 | +1.8% WoW. The market closed at 47,494points, gaining 1,261points | +2.7% WoW.
Sector-wise positive contributions came from i) Commercial Banks (413pts), ii) Fertilizer (281pts), iii) Cement (176pts), iv) Power (81pts), and v) Technology (77pts). Meanwhile, the sectors which contributed negatively were i) E&Ps (48pts), and ii) Miscellaneous (14pts). Scrip-wise positive contributors were EFERT (108pts), ENGRO (102pts), HBL (95pts), MCB (89pts), and MEBL (79pts). Whereas, scrip-wise negative contributions came from MARI (23pts), PPL (17pts), PSEL (16pts), PAKT (7pts), and AICL (6pts).
Foreigner selling was witnessed during this week, clocking in at USD 12.05mn compared to a net buy of USD 0.19mn last week. Major selling was witnessed in Commercial Banks (USD 8.86mn) and other sectors (USD 2.61mn). On the local front, buying was reported by Banks / DFIs (USD 13.61mn) followed by Companies (USD 2.1mn). Average volumes arrived at 291mn shares (up by 44% WoW) while the average value traded settled at USD 26mn (up by 15% WoW).
Other major news: i) Sept’23 POL products’ sales plunge 31% to 1.06m tons YoY, ii) WTL achieves major milestone in NASDAQ listing, iii) Discos to charge additional Rs1.7/unit for October, iv) SBP forex reserves fall by $21m to $7.615bn, and v) Textile exports slump for 12th month in a row.
Outlook and Recommendation
We expect the market to retain the positive momentum in the coming week. With the result season commencing from next week, certain scrips are expected to be in the limelight. Keeping in view, the IMF’s persistent call for gas price adjustments to address the circular debt issue, the caretaker government is expected to implement gas price hike soon. Our preferred stocks are OGDC, PPL, MARI, MCB, UBL, MEBL, LUCK, MLCF, ENGRO, FFC, HUBC, and INDU. The KSE-100 is currently trading at a PER of 3.7x (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%.
Courtesy – AHL Research