The market – not unexpectedly – closed in the red today with the rally showing early signs of exhaustion. The intraday high fell short of the 42,000pts watermark reached yesterday, with the KSE-100 eventually closing at 41,604pts, down 165pts (-0.4%). Volumes took a hit too, down c 30% d/d to 183mn shares, reflecting greater investor caution, in our view. It is possible that this reticence extends across the balance of the week.

Most pressure came from the E&P sector, which had rallied swiftly since the previous week. OGDC (-3.2%) and PPL (-2.6%) together took away c 120pts. In doing so, the market ignored news flow that Pakistani E&P companies will bid for an offshore block in Abu Dhabi. EPCL (-5.0%) was also a prominent decliner, following concerns over a potential sizeable gas price increase as this development (the government has not issued a formal notification as yet) continues to affect share/sector price performance. The major gaining stocks included DAWH (+5.0%), HUBC (+2.2%), MEBL (+2.2%) and SHFA (+5.0%). In terms of traded value, most interest was seen in OGDC (USD 7.7mn), PPL (USD 7.1mn) and HUBC (USD 3.8mn). Volumes were led by BOP (16.0mn shares), UNITY (14.3mn shares), FFL (13.2mn shares) and KEL (12.4mn shares).

We retain our constructive outlook for 2020, but flag that in the absence of fresh triggers, the market may enter a consolidation phase in the near-term. Stock picking is likely to be become more important – we continue to see value in the likes of OGDC, HUBC, LUCK, BAFL and APL but also flag that certain stocks are trading at a sharp premium to the market on 2yr forward earnings. These relatively pricey stocks include CHCC and ASTL, and profit taking may be considered in both. (Courtesy: Intermarket Securities Limited.)