In the outgoing week, the market opened to a blood bath session, shedding 1,250pts on the back of surprising dismissal of no confidence motion by the NA deputy speaker followed by dissolution of the National Assembly. Moreover, rupee depreciated to its all-time low of 188/USD amid sliding foreign exchange reserves and the ongoing political uncertainty. This necessitated a massive policy rate hike (+250bps) to 12.25% by the SBP in an emergency MPC meeting. Albeit, the bourse welcomed a steep revival of investor’s confidence, given the clarity obtained through Supreme Court’s much awaited judgement rejecting the speakers’ dismissal of the vote, together with decreasing oil prices further adding to the gains. The bourse closed at 44,445 pts, (down by 1.56%) WoW.
Sector-wise negative contributions came from i) Cement (314pts), ii) Oil & Gas Exploration (89pts), iii) Power Generation & Distribution (80pts), iv) Engineering (65pts), and v) Food & Personal Care Products (60pts). Whereas, sectors which contributed positively were i) Chemicals (70pts), ii) Fertilizer (63pts), iii) Cable & Electrical Goods (5pts), iv) Inv. Banks/Inv. Cos./Securities Cos. (4pts), and v) Real Estate Investment Trust (2pts). Scrip-wise negative contributors were LUCK (145pts), HUBC (60pts), TRG (48pts), DGKC (46pts) and OGDC (45pts). Meanwhile, scrip-wise positive contribution came from EPCL (55pts), SYS (26pts), EFERT (24pts), MEBL (22pts), and MCB (19pts).
Foreign selling continued this week, clocking-in at USD 3.78mn compared to a net sell of USD 15.55mn last week. Major selling was witnessed in Commercial Banks (USD 3.8mn) and Cement (USD 1.4mn). On the local front, buying was reported by Individuals (USD 14.8mn) followed by Banks/DFI’s (USD 4.7mn). Average volumes clocked-in at 153mn shares (down by 51% WoW) while average value traded settled at USD 26mn (down by 42% WoW).
Other major news: i) UAE defers $2bn debt payment on govt’s request, ii) Cut-off yield rises by up to 80bps, iii) Cement exports; Manufacturers, revenue collection, FX reserves affected badly by decline, iv) SBP announces 100pc cash margin on 177 items’ import, v) Punjab PA session postponed till 16th, vii) US says supports ‘constitutional’ process in Pakistan, vii) Financing under EFS; Markup rate raised by 2.5pc.
Outlook and Recommendation
As clarity has emerged on the political front, we expect the stock market to show strong signs of a comeback in the upcoming week. Moreover, it is likely that the rollover of Chinese loans worth USD 2.3bn is on cards, which will conserve the falling reserves. Furthermore, dip in international oil prices amid demand slowdown from China and emergency crude stockpile releases by International Energy Agency is likely to shift the bourse to the green zone.
Our preferred stocks are OGDC, PPL, MARI, HBL, MCB, UBL, MEBL, FABL, LUCK, MLCF, FCCL, ENGRO, FFC, HUBC, PSO, INDU and SNGP. The KSE-100 is currently trading at a PER of 4.7x (2022) compared to Asia Pac regional average of 11.5x while offering a dividend yield of ~8.8% versus ~2.7% offered by the region.
Courtesy – AHL Research