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AKD STOCK SMART

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Weekly Review                                

With a modest recovery in the first couple of days, KSE-100 index spiraled down over the week erasing all CY18TD gains (+0.35%) to close at 40,855pts, down 2.1%WoW, back at levels last seen in end-July. Showcasing all the tell-tale signs of a highly volatile, illiquid (average weekly turnover shrinking 22%WoW) and shifty near term outlook, investors seem to remain cautious, based on: i) a number of crucial, time sensitive decisions for the nascent Government where clarity is awaited (headway on IMF negotiations vital), and ii) growing risk of a cyclical downturn in consumption led demand where monetary tightening and high fuel prices make for a terse spending backdrop. Key news flows for the week were: i) US Secretary of State Michael Pompeo stating that his visit to Islamabad led to an agreement that it’s time for the United States and Pakistan to deliver on their commitments, ii) the central bank planning to auction PkR5.15trn worth of Market Treasury Bills and Pakistan Investment Bonds during Sep-Nov’18, iii) Prime Minister Imran Khan approving increase in gas prices up to 46% as proposed by OGRA, while ordering steps to control annual gas theft of PkR50bn, and iv) The president on the advice of the PM reconstituting the Council of Common Interests (CCI), and constituting the Cabinet Committee on China-Pakistan Economic Corridor (CCoCPEC). Volume leaders for the week were: i) BOP (57.4mn shares), ii) KEL (54.3mn shares), iii) AGL (35.9mn shares) and iv) EPCL (30.7mn shares). Constituents of the leader board were: i) ABL (+2.3%WoW), ii) KAPCO (+2.1%WoW), iii) UBL (+1.9%WoW), iv) KEL (+1.5%WoW), whereas laggards were: i) PIOC (-10.9%WoW), ii) DGKC (-9.3%WoW), iii) CHCC (-9.1%WoW) and iv) NCL (-6.8%WoW).

Outlook

More volatility is expected as dulling volumes (average volumes at 138.7mn shares) give rise to large, incoherent moves in thinly traded scrips. Accumulating positions on dips and tactical sector switching could yield returns. Overall, market participants will be closely monitoring policy decisions, particularly regarding gas or electricity price hikes (proposed by OGRA and NEPRA with ECC's formal decisions pending) and near term measures to curtail the external account deficit (increased RDs, other non-tax measures). â€‹

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