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AKD STOCK SMART, May 30, 2019

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Weekly Review                                

Cooling off after a jubilant last week, index started the week in red as concerns emerged on the announced stock market fund while details of the upcoming budget weren't very supportive with government looking towards every source possible to meet the revenue target of PkR5.5tn for next year. Towards the midweek, euphoria on the back of market support fund was witnessed again after confirmation from Finance Adviser leading to index closing the week at 35,975pts, up 0.8%WoW. News of price increase by local cement manufacturers ignited a rally in the cement sector while govt. looking to withdraw zero-rated status for textile players kept pressure on the textile sector. Increased activity was witnessed during the week with avg. daily traded volume standing at 165mn share vs. 157mn for previous week while foreigners  remained net sellers for the week with an outflow of USD2.95mn. Key news flow impacting sentiment included: 1) Government announ­cing on Saturday that it would increase next fiscal's revenue target to PkR5.5trn — almost 35.4 per cent or PkR1.45trn higher than current year's revised estimate of PkR4.1trn, 2) Government planning to withdraw certain exemptions given to farm sector including reduced rates of general sales tax on seeds, fertilizers and pesticides, 3) State Bank of Pakistan (SBP) raising PkR125bn against total bids worth PkR464.8bn while rejecting bids asking for higher returns in first auction of the long-term Pakistan Investment Bonds (PIBs) since the rate hike of 150 basis points on May 20. The leader board during the week included: 1) PSMC (+19.7%WoW), 2) HASCOL (+9.6%WoW), 3) PSO (+6.7%WoW) and 4) APL (+6.5%WoW), whereas laggards were: 1) FFBL (-8.7%WoW), 2) CHCC (-7.9%WoW), 3) NCL (-6.9%WoW) and 4) FCCL (-6.8%WoW). Volume leaders included: 1) BOP (59.9mn shares), 2) UNITY (37.3mn shares), 3) FCCL (32.8mn shares) and 4) MLCF (30.6mn shares).

Outlook

Activity is expected to remain low in the only trading session before Eid next week, however post-Eid, Budget'19 is going to set the direction where heavy taxation measures are expected – exerting pressure on the stock market. Having said that, stock market support fund could get active and provide support thus helping to maintain stability. Market will also start looking towards quarterly results where disappointing results in selected sectors like cement, steel will keep their performance under check.

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