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Stock Smart Weekly (Jul 02, 2021)

StockSmart                       

Weekly Review                                

KSE-100 remained under pressure during the earlier sessions of the week with financial year coming to a close. However, fresh buying 01st Jul’21 onwards and passage of finance bill resulted in a turnaround in a market performance during the last two trading sessions, with KSE-100 closing at 47,686pts, up 0.17%WoW. The average daily turnaround however, declined 10%WoW to 622mn shares. Major amendments from initially presented Finance bill relate to, i) increased incentives for the auto sector, with reduction in GST from 17% to 12.5% for vehicles up to 1000CC vs. 850CC as per initial proposal and ii) reduction in sales tax of milk manufacturers, amongst others.  Meanwhile, refinery policy still remains awaited. Sector-wise, major event included NAB allowing power division to process payments for IPPs under pre-1994, 1994 and 2002 power policies, which resulted in a rally in 2002 PP IPPs and their holding companies. Major newsflow during the week included i) current account deficit accelerating to $632m in May leaving a meagre $153m surplus in 11MFY21, with ii) Pakistan’s trade deficit during the current fiscal year 2020-21 reaching US$30.796bn as compared to US$23.180bn for FY20, up 33% led by 25.8%YoY growth in imports overshadowing 18.0%YoY increase in exports iii) inflation clocking in at 9.7% vs. 10.9% in May’21, taking the FY21 average inflation number to 8.6%, iv) Sui Southern Gas Company (SSGC) announcing to resume normal supply as KPD starts providing 100mmcfd of gas, ramping up to full capacity by 7th Jul’21, and v) oil sales increasing 15/4% YoY/MoM, with FO sales taking the lead (+176%YoY). Top performers of the market included i) AGP (+25.5%WoW), ii) SFL (+10.4%WoW), iii) UNITY (+6.6%WoW), iv) ABOT (+6.0%WoW), and v) MUREB (+5.6%WoW). Meanwhile laggards included: i) GATI (-23.8%WoW), ii) HASCOL (-22.8%WoW), iii) BYCO (-6.7%WoW), iv) CHCC (-5.2%WoW), and v) SCBPL (-4.2%WoW). Flow wise, individuals remained the major buyers with a net buy of USD13.63mn followed by companies (net buy +USD13.43mn) while insurance stood on the other side with a net sell of USD18.46mn followed by mutual funds (net sell of USD10.5mn).

Outlook

The market performance will be affected by upcoming result season where we expect margin suppression for cyclical plays on the back of increased raw material costs. However surprises could arise from players maintaining large (i.e. low cost) inventory. Select Oil and Marketing Companies, Textiles and Automobiles are likely to perform well in anticipation of result season.

AKD Research