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Stock Smart Weekly (Sep 24, 2021)

StockSmart                       

Weekly Review                                

Moving along the trend set in motion in previous week, KSE-100 index posted negative performance across the week, closing at 45,073pts whereas the intraday weekly low was marked at 44,788pts. Over the outgoing week, the index cumulatively lost 1,562pts or 3.4% where a 25bps hike in interest rates by the Central Bank with an indication of more hikes in future coupled with month-end volatility, played over market sentiments. Other major news flows during the week were, i) Central Bank tightening regulations on consumer financing and mandating banks to share 5-day import payments schedule, ii) Govt. considering re-imposing regulatory duties (even higher than in first instance, in certain cases) to curb auto imports, ii) Petroleum division proposing to increase gas prices by up to 35%, iv) Pakistan planning to issue international Sukuk bonds in Oct’21 to raise US$1.5bn, and lastly v) EU extending GSP+ status to Pakistan with six new conventions. Volumes relatively dried up with avg. daily turnover standing at 383.5mn shares as against 400.1mn shares in the previous week with major activity tilted towards mainboards as indicated by KSE stocks occupying 39.6% compared to 37.0% of KSE-ALL volumes in the previous week. Pressure was witnessed across sectors where within major sectors, Engineering was most hit registering a decline of 6.3%WoW followed by Auto Assemblers, down 5.9%WoW, while Refineries stood as worst performer (down 17.2%) – over uncertainty on refinery policy and the architect of the policy, SAPM Tabish Gauhar resigning indicating possible delays — amongst all sectors. Flow-wise, Foreigners, and Others (local) played a major role in absorbing selling pressure by other participants, with cumulative net inflow standing at US$12.6mn while Individuals and Companies cumulatively squared US$11.0mn positions. Stock wise gainers were, i) HMM (+6.8%WoW), ii) PSEL (+6.6%WoW), iii) SCBPL (+5.7%WoW), iv) ARPL (+4.3%WoW), and v) SNGP (+4.1%WoW), while laggards were, ANL (down 19.3%WoW), ATRL (down 17.9%WoW), BYCO (down 16.8%WoW), PAEL (down 16.4%WoW), and v) BNWM (down 13.7%WoW).

Outlook

Market is likely to remain volatile in the near term with market direction to be determined by IMF review. Reversing certain incentives such as in the case of Autos should be viewed as material positive particularly from a macro lens, easing pressure on external account. Moreover, investors should adopt a top-down approach to investing where possibility of further interest rate hikes could bring Banking Sector into limelight while Techs and Textiles (on currency depreciation where stronger earnings are yet to be priced in) are other sectors of interest. Techs should remain under pressure owing to structural impediments faced by one of the companies, deteriorating sentiments on overall sector, hence weakness should be taken as an opportunity to accumulate. 

AKD Research