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Stock Smart Weekly (Nov 26, 2021)

StockSmart                       

Weekly Review                                

Despite the positive news-flow regarding the IMF staff level agreement, the benchmark KSE-100 index trimmed the last week’s gains on account of unexpected hike of 150bps in policy rate by SBP. In addition to this, the Current Account Deficit (CAD) widened by US$1.66bn in Oct’21 and continued to increase from 4.1% to 4.7% of the GDP, expanding beyond the target of 2-3% for the entire financial year. With negative news-flows engulfing the investors, the confidence remained jittery. At the same time, the PkR continued its downward trajectory against US$, hitting a low of PkR176.5/US$. As a result, the benchmark KSE-100 index lost its value during the week by 5.1%WoW to close at 44,114pts in contrast to 46,489pts last week. The average traded volume rose 8.2%WoW and stood at 264.38mn. Other major events during the week included; i) weekly inflation hitting 7-month high of 18.34%YoY, ii) petrol pump dealers calling nationwide strikes, iii) 1-year KIBOR rising to 11%, iv) Ayub Afridi resigning  from senate, a clear indication that PM’s Finance Advisor Shaukat Tarin is to be elevated in the upper house of Parliament, v) cabinet approving PkR134bn to IPPs as a second installment, vi) SBP keeping the inflation outlook unchanged at 7-9% in medium term, vii) Bank deposits rising 13% CYTD to PkR19.34trn, viii) Fertilizer offtakes surging 45%YoY and ix) SBP reserves taking the biggest drop of US$691mn in FY22 so far owing to dual pressure of debt repayments and rising CAD. Stock wise, major performers were, i) GATI (+30.9%WoW), ii) HMM (+12.8%WoW), iii) ATLH (+4.6%WoW), iv) EFUG (+3.7%WoW) and HGFA (+3.6%WoW), while laggards were, i) ANL (-16%WoW), ii) SEARL (-15.8%WoW), iii) TRG (-15.3%WoW), iv) DGKC (-13.7%WoW), and v) PIOC (-13.7%WoW).

Outlook

As expected, the market remained under pressure after SBP increased the benchmark interest rates by 150bps against the general consensus of 100bps. Also, the news of CAD deteriorating to US$1.66bn created further volatility in the market. For upcoming week, we expect the market to change the momentum to positive side owing to the meltdown in Crude Oil where Brent Crude (ICE) has declined 5.73% so far this evening, thereby giving a sigh of relief on the commodities front. On the flipside, the birth of a new Covid—19 variant may rise the panic across the globe.

AKD Research