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AKD STOCK SMART, Aug 21, 2020

StockSmart                       

Weekly Review                                

Poor earning reads in the backdrop of stretched valuations aided bears to stage a comeback, putting an end to 8-week winning streak. The market participants largely ignored positive news on the macro front (record-high monthly remittances, fitch affirming long term rating at “B-“, with a stable outlook), with benchmark KSE-100 index losing 669pts (-1.7%WoW) to close at 39,621.59pts. Commercial banks lost 1.3%WoW on weaker than expected earning reads (i.e. MCB & ABL). E&Ps went down 0.7%WoW on gov’t approval of the divestment plan (i.e. OGDC & PPL).  Power companies shed 5.6% on potential downward revision in returns following signing of MoU between the gov’t and IPPs. Market activity significantly declined during the week, with average daily turnover shrinking to 440.7mn shares (down 24.1%WoW). Other key news impacting the market during the week were: i) Fitch has affirmed Pakistan’s long-term foreign-currency Issuer Default Rating (IDR) at “B-” with a stable outlook, ii) Remittances hit the record high monthly level in Jul’20, with the country receiving US$2.76bn (up 36.5%YoY), iii) Textile exports soared 14.4%YoY to US$1.27bn in the Jul’20, with garments, knitwear, bed-wear, and towel exports rising 18.04%YoY, 20.4%YoY, 25.3%YoY, and 21.4%YoY, respectively, iv) Industrial sectors are reportedly mulling over review petition on the recent verdict of the Supreme Court on GIDC, v) the gov’t has raised PkR38.8bn through the auction of PIBs, with the cut-off yields rising 83/8/0/23/15bps to  8.2%/8.45%/8.99%/9.98%/10.55% on 3/5/10/20yr paper, respectively. Performance-wise, top gainers amongst the KSE-100 constituents were i) SSGC (+12.4%WoW), ii) SNGP (+11.6%WoW), iii) FCEPL (+11.0%WoW), iv) EPCL (+5.2%WoW), v) AGP (+4.6%WoW), while i) HUBC (-10.2%WoW), ii) FFBL (-9.0%WoW), iii) EFERT (-6.3%WoW), iv) HASCOL (-5.9%WoW), and v) FML (-5.9%WoW) were the major laggards.

 

Outlook

 

Amidst lack of any major trigger, the market is expected to trade in a range bound territory. With earnings season in full swing from next week onwards, stock specific movement cannot be ruled out. Major names slated to announce their earnings next week include DAWH, GLAXO, ISL, SYS, BAFL, ACPL, CHCC, FATIMA, POL, APL, BOP, ABOT, and NBP. Moreover, progress on IPP negotiations particularly with regards to payment details could keep listed IPPs in the limelight.

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