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AKD STOCK SMART

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Weekly Review                                

The market started the week on a negative note, losing 888pts (-2.4%) in the first two trading sessions, as the gloom and doom on the macro-economic situation kept the broader market sentiment depressed. The stocks later rallied 2% in the last three trading session on earnings beat in key sectors (i.e. Cements & Banks: up 2%/1.5%WoW), recouping some of earlier losses.  Overall, the benchmark KSE-100 index declined 0.4%WoW (-162ptsWoW) to close the week at 37,130pts. Trading activity remained weak and skewed towards mainboard (KSE-100 volume as of KSE All at 51% vs. 27% in the last week), with average daily trading volumes declining 30%WoW to 122.45mn shares. Key news flows impacting the market during the week were: i) the new economic team of gov’t has decided to fine-tune the much-awaited tax amnesty scheme which will be unveiled soon as a comprehensive document, ii) the gov’t has reportedly kick started the process of renegotiation of power purchase tariffs with the IPPs to ease of burden of mounting circular debts, iii) the gov’t and pharmaceutical companies have reportedly agreed on full implementation of Statutory Regulatory Order (SRO) 1610 pertaining to the hardship cases, iv) the budget deficit touched PkR1.6bn (4.2% of GDP) in the first nine months of the current fiscal year, and v) the Supreme Court has restored deduction of withholding tax, sales tax and service charges on pre-paid cellular scratch cards by vacating its earlier suspension order. Performance wise, i) CHCC (+8.17%WoW), ii) UBL (+5.16%WoW), iii) FCCL (+4.76%WoW), iv) HMB (+4.29%WoW), and v) INDU (+3.56%WoW) were the major gainers in AKD Universe, while laggards included: i) FFBL (-10.10%WoW), ii) ASTL (-10.08%WoW), iii) FATIMA (-7.30%WoW), iv) PSMC (-6.89%WoW), and v) MLCF (-4.13%WoW).

Outlook

Ongoing result announcements will continue to dictate the broader market direction in the near term, where continuation of upside surprises may extend the rally seen in the last three trading sessions. Announcement of amnesty scheme is another key flashpoint, which will keep investors optimistic. Medium term market performance however hinges on a formal entry into IMF program (IMF mission scheduled  to arrive in Islamabad on Monday) and policy clarity thereafter. In this regard, we highlight that the upcoming budget holds key importance, where investors are likely to build in budgetary expectations.

AKD Research