Weekly Review
Market remained strong throughout the week, with KSE-100 index reaching its highest-ever closing, just shy of the 89k mark, closing at 89,994pts, up by 5.6%WoW. This marked the highest weekly return in 27 weeks and the 47th highest weekly return since the index’s inception. More importantly, the KSE30 index (price index) reached an all-time high of 28,395pts. The week started with positive momentum buoyed by the settlement of political noise following the passage of the stalled 26th Constitutional Amendment. Additionally, optimism extended with a swing of corporate result announcements and favourable economic developments. The rally was broad-based, with 80 out of 100 companies delivering positive returns. Leading sectors were Fertilizer, Cement, and Banks, contributing 1,312, 929, and 847pts to the index, respectively, primarily due to strong annual growth in company results. On the macro front, the current account posted a surplus for the second consecutive month at US$115mn in Sep’24. Additionally, SBP held Fx reserves increased by US$18mn WoW, at US$11.0bn as of Oct 18, 2024.
Market participation also improved significantly, with average daily traded volume rising by 23%WoW to 532mn sh from 432mn sh in the previous week. The PkR remained flat against the greenback on the currency front, closing the week at 277.6/US$. Other major news flows during the week included 1) IT exports surge 42%YoY in Sep’24, 2) Banking sector deposits inclined by 19%YoY to PkR31.3tn in Sep’24, 3) Sales tax on tractors hiked to 14% from 10%, 4) Loans to private sector rose 4.9% to PkR8.4tn in Sept’24, and 5) Nepra approves KE’s generation tariff with key adjustments. Sector-wise, cement, refinery, and mutual funds were among the top performers, with 18.3%/9.4%/8.7%WoW, respectively. On the other hand, Modarabas, Textile composites, and Vanaspati & allied industries were amongst the worst performers with a decline of 12.0%/9.5%/5.0%WoW.
Flow-wise, Foreigners recorded major net selling with a net sell of US$16.4mn. On the other hand, Mutual Funds and other organizations absorbed most of the sale with a net buy of US$12.1/8.3mn, respectively. Company-wise, top performers during the week were i) KOHC (up 30.1%WoW), ii) CHCC (up 29.8%WoW), iii) AICL (up 26.4%WoW), iv) KEL (up 23.5%WoW), and v) ATRL (up 21.1%WoW), while top laggards were, i) ILP (down 13.3%WoW), ii) PIBTL (down 11.0%WoW), iii) LOTCHEM (down 5.3%WoW), iv) IBFL (down 3.7%WoW), and v) NESTLE (down 3.4%WoW).
Outlook
The market is expected to remain positive, primarily focusing on the upcoming MPC meeting, where an anticipated rate cut could further bolster market momentum. Despite the recent rally, valuations remain attractive, with the market trading at a P/E of 4.0x and offering a dividend yield of 11.2%. We recommend focusing on sectors that stand to benefit from monetary easing and structural reforms, particularly high-dividend-yield stocks that are likely to re-rate as yields converge with fixed-income returns. Our top picks include OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.
Courtesy – AKD Research