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AKD STOCK SMART, Jul 30, 2020

StockSmart                       

Weekly Review                                

Despite rollover week and broader expectations of correction ahead of Eid, the market maintained its positive momentum in all the four trading sessions during the outgoing week. The benchmark KSE-100 index gained 4.39%WoW to close the week at 39,258pts. Overall, the market returned 14.1% in Jul’20 – the highest return in the month of July in the past 17 years. Market participation marginally declined 4.3%WoW during the week - albeit remained well above daily average during CY20 (avg. daily turnover: 389.84mn shares in the outgoing week vs. 231.49mn shares in CY20). PAEL (108.60mn shares), KEL (91.92mn shares), TRG (88.10mn shares), MLCF (75.97mn shares), and PIBTL (71.76mn shares) were the volume leaders.  Sector-wise, all the mainboard sectors barring Textile composite closed in green, with Autos (8.5%WoW), Cement (+7.3%WoW) Engineering (+5.6%WoW) gaining on expectations of hastened demand recovery post-COVID-19 while Banks returning 5.6%WoW on the potential end of easing cycle following MPC’s decision not to hold the scheduled meeting in Jul’20.  Key news flows impacting the market during the week included i) the MPC on last Friday announcing not to hold schedule meeting while alluding to further action if need be, ii)  the gov’t committee on tariff negotiations with the IPPs failing to make any headway so far, iii) the gov’t planning to set up a commission to probe the recent shortage of petroleum products, shift oil pricing to quarterly basis and change the pricing mechanism for imported Euro-V petrol and diesel to Platt’s Oilgram instead of PSO imports, iv) WB extending US$505mn under the Resilient Institutions for Sustainable Economy (RISE) program with seven major conditions for undertaking structural reforms and v) the gov’t raising ~PKR168 billion through T-bills, against the auction target of PkR200bn, with cut off yields rising (3M/6M/12M: 6.95/7.10/7.14%, up 39/53/54bps). Amongst the mainboard, top gainers during the week were i) TRG (+24.1%WoW), ii) HCAR (+23.2%WoW), iii) ATRL (+19.2%WoW), iv) HMB (+14.8%WoW), v) CHCC (+13.1%WoW), while i) NESTLE (-3.7%WoW), ii) FFBL (-3.5%WoW), iii) ARPL (-3.0%WoW), iv) ANL (-2.6%WoW), and v) UNITY (-2.1%WoW) were the major laggards.

 

Outlook

 

Amidst lack of any major trigger, the market should continue current positive momentum post-Eid-ul-Azha. However, profit-taking cannot be ruled out considering 14.1% return over the past one month. UBL & EPCL are two major names slated to announce their earnings next week. Besides earning announcements, macro reads particularly on inflation and external trade are important to watch, as the same will set the monetary policy expectations going forward. We expect inflation to clock in at 8.64%YoY vs. 8.59%YoY in the last month and 8.4%YoY in Jul’19, where higher than expected reading could further drive performance in Banks.

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