The PSX market is expected to remain positive in the upcoming week

The market commenced on a negative note this week amid hustle and bustle in the political arena. Furthermore, the Pak Rupee remained under pressure against the greenback, closing at PKR 220.84 (down by PKR 2.41 | 1% WoW). Furthermore, SBP reserves remained unchanged at USD 7.6bn this week. In addition to this, FDI declined by 47% YoY during 1QFY23. The momentum shifted towards the green zone since the current account deficit narrowed by 72.5% YoY to USD 316mn during Sep’22 (lowest since Apr’21). Furthermore, a statement from USA showing confidence in Pakistan’s nuclear strengthened the sentiment. Moreover, a loan worth USD 1.5bn from ADB was finalized during the week, which kept the momentum strong. The market closed at 42,213 points, gaining 265 points (up by 0.63%) WoW.

Sector-wise positive contributions came from i) Fertilizer (112pts), ii) Power (82pts), iii) E&Ps (49pts), iv) Banks (37pts) and v) Tobacco (31pts). Whereas, sectors which contributed negatively were i) Technology (40pts), and ii) Chemical (28pts). Scrip-wise positive contributors were HUBC (80pts), ENGRO (77pts), MARI (51pts), POL (44pts) and MTL (40pts). Meanwhile, scrip-wise negative contribution came from PPL (31pts), PSO (26pts), SYS (19pts), TRG (18pts) and EPCL (16pts).

Foreigners selling was witnessed during this week, clocking in at USD 3.4mn compared to a net buy of USD 12.3mn last week. Major selling was witnessed in Commercial Banks (USD 1.9mn), Technology (USD 1.1mn) and All Other Sectors (USD 0.9mn). On the local front, buying was reported by Individuals (USD 5.4mn) followed by Broker Proprietary Trading (USD 0.9mn). Average volumes clocked in at 228mn shares (down by 14% WoW) while average value traded settled at USD 28mn (down by 35% WoW).

Other major news: i) Hum Network subsidiary to manage $50m tech fund, ii) Govt raises Rs853bn via T-bill auction, iii) Q1 textile group exports witness 3.68pc growth YoY, iv) Rs8.37bn refund approved by Nepra.

Outlook and Recommendation

The market is expected to remain positive in the upcoming week as the participants will celebrate the removal of Pakistan from FATF’s grey list. Furthermore, in case of materialization of inflow of USD 1.5bn from ADB, the market will respond positively. However, the political noise will keep the market in check. 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 4.1x (2023) compared to Asia Pac regional average of 12.2x while offering a dividend yield of ~9.8% versus ~3.0% offered by the region.

Courtesy- AHL Research

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