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AKD STOCK SMART, Sep 14, 2018

Weekly Review                                

The second week of Sep'18 saw a short stunt by bulls that took the index to 41,049pts, which failed to hold relegating the index to retreat closing at 40920pts up 0.15%WoW (positive after two weeks) as news flow failed to bolster sentiments. Bears took note of concerns on the economy, resolving the crucial issue of twin deficits and uncertainty over gas price hike. In another news: i) the GoP's Cotton Crop Assessment Committee estimates crop output will be 10.8m bales in 2018 vs. the 14.4m bales target set in April due to decreased sowing area amid shortage of water, ii) The PTI-led coalition government looks set to reverse the tax concessions of the previous government, iii) Pakistan's economic managers on Thursday briefed the IMF team from Washington, DC, on video conference about the proposed mini-budget and partial withdrawal of tax incentives, imposition of regulatory duties on luxury items and slashing down development outlay, and iv) the PTI government on Thursday announced that it would speed up implementation of the $62 billion China-Pakistan Economic Corridor, open it to other countries and hire international consultants for financial modelling of future projects. Oil and Gas sector was up 1.8%WoW tracing upward movement in international oil prices followed by Chemicals (+1.4%WoW) on improvement in margins. Banks under influence from foreign selling of USD12.1mn lost 2.0% of value while cements closed in flat. Avg. Volume remained flat WoW at 138.9mn shares whereas average traded value stood at USD46.6mn as against USD39.2mn in the previous week. Volume leaders for the week are; i) Unity Foods (58.9mn shares), ii) MLCF (40.4mn shares), iii) DOL (32.7mn shares), and iv) FFL (28.7mn shares). Constituents of the leader board under our AKD Universe were; i) FATIMA (+13.23WoW), ii) CHCC (+7.28%WoW), iii) NML (+6.89%WoW), and iv) NCL (+5.93%WoW), whereas the laggards were, i) BAFL (-11.14%WoW), ii) MLCF (-6.52%WoW), iii) ABL (-4.95%WoW), and iv) HBL (-4.11%WoW).

 

Outlook

Market participants are expected to continue taking exposures in blue scrips eyeing cheap valuations (CY19F P/E: 7.0x) as seen in the current week (ADTV KSE100/KSE-Allshare stands at 0.72 vs. 0.57 in the last week of Aug'18). We believe major sentiment drivers over the next week would be measures announced in the mini budget on Tuesday, PM's visit to Saudi Arabia, and any clarity on the direction of the GoP to address the current account woes. Until clarity emerges, we do not expect market volumes to pick up.​

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