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Stock Smart Weekly (Jul 09, 2021)

StockSmart                       

Weekly Review                                

Weak sentiment from last week coupled with geopolitical tensions in the region and uncertainty over talks with IMF continued to derail investor confidence during the week apart from Thursday’s session which saw massive buying from Mutual Funds in tune of US$12.7mn, helping the benchmark index to break the losing streak. The index, however, could not sustain that level and closed in red in the following session by cumulatively losing 123pts (-0.26%WoW) to close at 47,563pts. First, the political uncertainty at the border post US-withdrawal from Afghanistan is creating a vacuum in a high foreign stake region while uncertainty over IMF stance on structural reforms regarding tax and energy sector continues to play on investors’ mind. In light of increase in COVID-19 delta variant and poor compliance of SOPs, NCOC has hinted towards a possible partial lockdown in the cities, further putting the investors on their toes. Participation during the week remained dull with average daily traded volume standing at 485.9mn shares against 621.9mn shares witnessed during last week. Sector-wise, both cement and steel manufacturer increased local prices of cement bags and rebars amid soaring coal and scrap prices. Major news flow during the week included i) NYSE-listed ETF offers exposure to Pakistani stocks which includes four firms Systems Ltd, Meezan Bank, Lucky Cement and The Searle Company, ii) Overseas Pakistanis remit US$1.6bn through RDAs, iii) Pakistan’s public debt rose (+8.23%) to PKR2.89tn in 11MFY21, iv) Pakistan sold US$1bn on Tuesday in a reopening of existing three-tranche bonds launched in Mar’21, a deal that raised $2.5bn, v) Govt raised PKR146.4 bin via fixed rate PIBs’ auction, and vi) The power division informed Senate panel that the circular debt had increased by PKR260bn this year. Top performers of the market included i) AGP (+9.8%WoW), ii) SCBPL (+9.0%WoW), iii) GATI (+7.0%WoW), iv) HBL (+4.1%WoW), and v) HCAR (+4.0%WoW). Meanwhile laggards included: i) PAKT (-13.5%WoW), ii) HMM (-11.7%WoW), iii) KAPCO (-10.4%WoW), iv) STJT (-7.1%WoW), and v) ANL (-7.0%WoW). Flow wise, Companies remained the major buyers with (net buy of USD4.14mn) followed by Mutual Funds (net buy of USD3.91mn) while Broker Proprietary Trading stood on the other side with (net sell of USD4.01mn) followed by Insurance Companies (net sell of USD2.79mn). 

Outlook

The market will look to pounce on the upcoming result season where we expect margin suppression for cyclical plays on the back of increased raw material costs. However, surprises could arise from players maintaining large (i.e. low cost) inventory. Auto assemblers and Auto part manufacturers are also expected to continue garnering investors’ interest with the recently announced incentives in auto policy. Construction and allied sectors, select Oil and Marketing Companies and Textiles are likely to perform well in anticipation of result season.

AKD Research