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AKD STOCK SMART

Weekly Review                                

Building on last 5-week momentum, the market started the week on a positive note, with KSE-100 index gaining 502pts on the first trading session, as the market participants eulogized announcement of potential financial assistance of US$2.5bn from China. However, the index pared earlier gains in the following three sessions as lack of concrete developments on the IMF bailout shattered the investors’ confidence, with KSE-100 index losing 0.55%WoW to close the week at 40,887pts (down 226pts). Sector-wise, cement scrips remained in the limelight where sector initially gained on softening coal prices while paring back some of the earlier gains on disappointing Jan’19 offtakes. Trading activity slightly picked up (9.5%WoW to average daily turnover of 191.5mn shares), with concentration away from the main board. Key news flows impacting the market during the week included i) Gov’t officials reportedly hinting towards another financing support of US$2.5bn from China, aimed at boosting FX reserves, ii) international credit rating agency Standard & Poor’s downgrading Pakistan’s long-term credit rating to ‘B-Negative’ from ‘B’, citing fragile external position and weak growth outlook, iii) Pakistan and Russia inking an inter-corporate agreement for the laying of more than 1,500 km offshore gas pipeline costing US$10bn, iv) total cement dispatches declining by 10.7%YoY to 3.6mn ton in Jan’18, with a more pronounced decline in local offtake (down 18%YoY), and v) Country’s FX reserves marginally moving up 0.56%WoW (+US$83mn) to US$14.88bn during the week ended Feb 01’19, with reserves held by the central bank rising to US$8.19bn (+38mn). Key performers over the week were: i) FCCL (+6.89%WoW), ii) DGKC (+6.58%WoW), iii) CHCC (+5.28%WoW), iv) MLCF (+5.12%WoW) and v) INDU (+4.44%WoW), while laggards included: i) HASCAL (-4.75%WoW), ii) HBL (-3.39%WoW), iii) PSO (-3.09%WoW), iv) UBL (-2.92%WoW)  and v) EFOODS (-2.07%WoW).

Outlook

Broader market performance is likely to remain range-bound until clarity emerges on the potential IMF program. However, upcoming Saudi Crown Prince’s visit to Pakistan, with the likely announcement of multibillion-dollar investment deals could trigger a short-lived euphoric rally. Of more importance is the continued foreigners buying interest in setting market direction, in our view, where continuation of the same could keep the market upbeat.

AKD Research