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AKD STOCK SMART

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Weekly Review                                

Tensions on the eastern border and tough call from the FATF demanding swift action stoked a risk-off sentiment, with the KSE-100 losing 2.3% (785pts) on the first trading session of the week. The market was quick to recover and pared 86% of the earlier loses in the next three trading sessions, as the investors shifted their focus on positive macro reads (i.e. narrowing CAD, improving EODB ranking, & yield on short tenor gov’t paper coming off).  Overall, the benchmark KSE-100 index closed the week 0.63% lower at 33,657pts, down 213pts. Market activity remained weak following the application of a minimum standard commission, with average daily volume declining 10.9%WoW to 124.61mn. Key news flows impacting the market during the week included i) Current Account Deficit (CAD) narrowing 64%YoY (80%YoY) to US$1.548mn (US$259mn) in 1QFY20 (Sep’19) mainly on account of contraction in imports (-23%YoY in 1QFY20), ii) cut-off yields on short tenor gov’t paper declining by 25-67bps across the spectrum, with inversion in yield curve signifying rate cut over next 12month period, iii) Pakistan climbing 28 places in World Bank’s ease of doing banking (EODB) ranking, with the latest ranking placing the country at 108 (vs. 136), iv) latest data on large scale manufacturing (LSM) showcasing continuous slowdown in manufacturing sector with LSM index for Aug’19 declining by 7.06%YoY, and v)  SBP’s FX reserves increasing by US$79mn to US$7.89bn during the week ended Oct 18’19. Top performers during the week in the AKD Universe were, i) DGKC (+4.74%WoW), ii) HASCOL (+4.63%WoW), iii) ASTL (+4.3%WoW), iv) POL (+3.70%WoW), and v) KAPCO (+3.57%WoW) while, i) PIOC (-15.15%WoW), ii) FFBL (-10.16%WoW), iii) PSMC (-6.19%WoW), and iv) NCL (-5.89%WoW) were the major losers.

 

Outlook

The market sentiment next week will largely be clouded by the upcoming JUI-F led opposition march. The domestic political noise could gain momentum, as the protest date (Oct 31’19) draws closer. Besides, earnings season is in full blossom, where major corporates (FFC, GLAXO, KAPCO, SEARL, INDU, NBP, NCL, NML, CHCC, GATM, FATIMA, PSO, PPL, ASTL, HUBC, & LUCK) are scheduled to announce their result next week. While the expectations are tilted towards the down side, any surprises both on up/down side could sway the sentiment accordingly. From the macro vantage, the investors will keenly follow the Oct’19 inflation (we expect a soft reading of 10.68% vs. 11.38% last month) and upcoming IMF program review (IMF’s mission scheduled to arrive on Oct 28’19).

 

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