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AKD STOCK SMART, Sep 04, 2020

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Weekly Review                                

Index continued the bullish momentum in the outgoing week where record high activity was witnessed on fourth trading session of the week, concentrated mainly in side stocks. Number of factors contributed to index closing first four sessions in green including low inflation reading while OMC sales also posted a 21%YoY for Aug'20, however profit-taking towards the end of the week led to last session closing in red. KSE-100 closed the week at 42,023pts, up 2.35%WoW. Avg. volumes stood at 745.130mn shares vs. 439.60mn shares in the previous week led by, i) HASCOL (220mn shares), ii) UNITY (176mn shares), iii) TRG (156mn shares), iv) KEL (150mn shares), and v) PAEL (137mn shares). Major news flows were, i) Privatization Commission (PC) said to be at an advanced stage in finalizing arbitration agreement between Karachi Electric (KE) and other stakeholders, which will expedite the sale of 66.4% shares of the power entity to Shanghai Electric Power (SEP), ii) FBR surpassing its envisaged tax collection target by PkR39bn in 2MFY20, iii) Inflation easing to 8.2% in Aug'20, from 9.3% in Jul'20, iv) Government agreeing to increase the gas/electricity rate for zero-rated industry to USD6.5/mmbtu and USc9/kWh, respectively, after Aug'20, and v) Country's oil sales increasing by 21%YoY in Aug'20 to 1.6mn tons due to an increase in demand of furnace oil (FO) by 71%YoY to 311,000 tons. Flow wise, foreigners turned sellers (net sell: USD10mn) whereas within locals, Individuals with a net buy of USD15.4mn absorbed profit-taking by Banks/DFI (Net sell: USD6.0mn) and Insurance (Net sell: USD2.8mn). Top performers during the week were, i) HASCOL (+29.1%WoW), ii) SYS (17.3%WoW), iii) YOUW (16.7%WoW), iv) PSX (16.1%WoW), and v) UNITY (15.7%WoW) while laggards were, i) JDWS (-6.3%WoW), ii) SHEL (-6.0%WoW), iii) ATLH (-4.7%WoW), iv) SCBPL (-3.0%WoW), and v) HUBC (-3.0%WoW).

 

Outlook

 

Market should sustain its momentum is the coming weeks, in our view, as macroeconomic picture continues to improve after a low inflation reading for Aug'20. Moreover, Pakistan looks set to fully recover from COVID-19 as increase in cases remains firmly under control. Ongoing result season is expected to remain disappointing where we believe negatives are already priced-in. Cement/Steel should continue being the driving force in the backdrop of improved outlook for construction activity while declining oil prices can prove to be a sentiment dampener. â€‹

AKD Research