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AKD STOCK SMART, Mar 08, 2019

Weekly Review                                

KSE-100 Index finished 1.5% lower for the week to close at 38,950pts, marking the 4th consecutive week of negative close. Market initially reacted positively to increase in foreigners’ holding limit in PSX to 20% (Previously: 10%) however it tiptoed downwards rest of the week. Even the easing of border tensions with the neighboring country that concerned the market heading this week, along with i) Power Sukuk issuance of PkR200bn, ii) Government acting upon banned organizations (Positive from the perspective of FATF negotiations), iii) passing of second mini-budget, failed to generate investors’ interest in equities. We believe fundamentals that took backseat in the previous week came to haunt investor sentiments this week with disappointing Cement and OMC sales (down 19.8%YoY and 28%YoY in Feb’19 respectively). Participation continues to remain dull with avg. volumes for the week standing at 114.2mn shares vs. 152.4mn shares the previous week where major participation is witnessed in BOP, due to above expectation dividend of PkR0.75/sh. Mutual funds continued to remain net sellers (US$10.6mn) which was absorbed by Individual and Companies with net buys of US$5.1mn and US$3.5mn respectively. Moreover, foreigners also trimmed their position by US$3.4mn. Sector performance can be tagged to second mini-budget announcement with Automobile assemblers leading with +5%WoW (on removal of non-filer ban) where heavy-weights witnessed shrinking market capitalization. Within AKD universe, top performers include, i) PSMC (23.1%WoW) ii) INDU (11.7%WoW) iii) KAPCO (0.7%WoW) iv) HBL (0.3%WoW) whereas top laggards were, i) ASTL (5.4%WoW) ii) OGDC (5.3%WoW) iii) HUBC (4.8%WoW) iv) PIOC (4.7%WoW) v) MCB (4.7%WoW).

Outlook

We expect market to remain range bound next week with automobile players continuing to garner investors’ interest. However, we believe dry volumes to remain persistent until clarity emerges on the economic front (IMF being a key trigger point to attract sideline players). We advise investors to take a longer term horizon in their stock picks while trading on news flows in the near-term. We have preference for macro-hedged sectors (Banks, E&P, selected power, and textiles) where our top picks encompass MEBL, MCB, OGDC, HUBC, and NML.

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