EUR 12.80 For Business Accounts Only

AKD STOCK SMART,

The week marked recovery at the bourse with KSE-100 index gaining 2,537pts (or 7.65%WoW) to close at 35,704pts (market closed positively WoW for the first time after 7W). Importantly, index recuperation was supported by volumes, avg. volumes for the week stood at 157.2mn shares vs. 100.2mn shares in the previous week – a testament of investors capitalizing on discounted valuations. Activity was tilted towards mainboard as indicated by KSE-100/KSE-All share standing at 76.2% approx. similar to previous week. Unsuccessful drilling activity at Khekra-1 brought a volatile start to the week (KSE-100 index touching a low of 2.5% during the day before bouncing back to close flat, with OGDC and PPL losing 1.2%DoD and 4.8%DoD market capitalization respectively at close) whereas news regarding creation of Market support fund of PkR20bn defined investor sentiment for the rest of the week. Higher than expected interest rate hike (Interest rate increased by 150bps against our expectation of 100bps) by the Monetary Policy Committee (MPC) brought interest in the banking sector (+5.6%WoW with news regarding termination of compliance agreement by Federal reserve with UBL also acted as the trigger) while hike remained largely a non-event for the leveraged plays that gained from improved market sentiments. Other major market related news flows were, i) US$3.2bn Saudi Oil facility will be operational by Jul 1 that would reduce FX pressure, ii) Possible roll-back of subsidies to export sectors in FY20 budget as the Government looks to meet IMF primary deficit target of 0.6% of GDP, and iii) Government targeting PSDP level of PkR675bn, similar to previous year. Within AKD Universe, top performers include, i) GWLC (+32.3%WoW), ii) PIOC (+27.5%WoW), iii) PSO (+24.0%WoW), iv) MLCF (+22.4%WoW), and v) PSMC (+21.3%WoW).

Outlook

While euphoria surrounding Market support fund could persist in the immediate term, investors should remain wary of the fundamental weaknesses in sectors and adopt strict risk limit while taking exposures in those sectors. Investors are also advised to keep a keen eye on budget related news which is expected to define market directions in the upcoming week. Further, with holiday season near, we might see investors trimming their position sizes. We have preference for sectors that are macro aligned i.e. Banks (on interest rates), E&Ps (on currency devaluation and interest rate hikes), and selected power (Circular debt resolution and currency devaluation).