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AKD STOCK SMART, May 11, 2018

Weekly Review

Political fever once again pushed investors to opt the risk off approach, as Accountability Court’s deadline to decide on the corruption references against Sharif family drew closer. Losing 741pts in the first three trading sessions, KSE-100 index marginally recovered in the fourth session following SC’s decision to extend AC’s deadline by a month (till Jun 09’18). However, unable to sustain the recovering trend, market ended the outgoing week on a negative note, losing 942pts to close at 43,595pts. Trading activity during the week slightly improved 0.87%WoW, however avg. daily trading volume remained on lower side at 167.37mn shares, with 1) FDIBL (48.27mn shares), 2) UNITY (46.28mn shares), 3) SSGC (35.51mn shares), 4) FCCL (35.43mn shares) and 5) BOP (32.67mn shares) leading the board. Major news flows impacting the market included: 1) US pulling out from the landmark Iran Nuclear deal, while announcing to re-impose sanctions on Iran, 2) trade deficit widening to US$30.24bn in 10MFY18 – up 14%YoY, 3) federal gov’t announcing to issue floating rate Pakistan Investment Bonds (PIBs), aiming to improve the country’s debt profile, 4) fertilizers manufacturers raising urea prices by PkR100 per 50kg bag, adjusting for recent budgetary measures, 5) cement dispatches in Apr’18 growing by 17.46%YoY to reach at 4.237mn tons, as per APCMA, and 6)  SC announcing its verdict in Katas Raj Temple case, directing domestic cement manufacturers to find alternative water source. Price performance on the mainboard remained dismal, with key losers during the week in AKD Universe include 1) KEL (-5.71%WoW), 2) CHCC (-5.54%WoW), 3) ASTL (-5.22%WoW), 4) PIOC (-5.09%WoW) and 5) HUBC (-4.82%WoW), while major gainers include: 1) PPL (+2.94%WoW), 2) POL (+2.67%WoW) and 3) EFERT (+1.65%WoW).

  

Outlook

With MSCI Semi-Annual Index Review around the corner (scheduled on May’14), foreign flows in the run up to review and post review will be key in determining market direction. To note, MSCI Inc. will add Chinese “A-shares” in its EM index in the upcoming review, where potential inclusion of the same could further trim Pakistan’s current low weight (~0.08%) in the EM index. Moreover, extension in AC’s deadline for another month should tone down political noise - at least in the short term.  Also, oil price movement post US withdrawal from JCPOA will determine price performance in the E&P sector.

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