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Stock Smart Weekly (Sep 10, 2021)

StockSmart                       

Weekly Review                                

Market started the week under pressure as investors awaited MSCI’s decision of downgrading Pakistan to Frontier market status from Emerging Market, resulting in selling in some index heavy stocks while additional pressure was mounted on the market due to high trade deficit for Aug’21 coupled with depreciating PkR. However on fourth and fifth trading day of the week, market rebounded, led by technology sector and pared up all the losses for the week, with KSE-100 closing at 47,198pts, up 0.51%WoW. Cement sector was among the major laggards for the week, losing 2.6%WoW as coal prices continue to trade near 10 year high amid increased demand for power generation in developed economies. Moreover, government providing additional power to officials to monitor and control the prices of fifty categories of product including cement, steel also caused jitters among the investors, resulting in engineering sector losing 2.6% during the week. Refinery sector also remained among the laggards as the delay in approval of refinery policy continues to be a drag, however it has been included in the agenda for next week’s CCOE’s meeting where an approval can be a significant trigger for the sector.  Other major headlines during the week included: i) Cement sales growing by 23%YoY to 4.4mn tons in Aug’21, ii) Trade deficit widening by 119.94%YoY in 2MFY22 to USD7.5bn against USD3.4bn last year, iii) MSCI announcing that it will reclassify the Pakistan Indexes from Emerging Markets to Frontier Markets, iv) Foreign exchange inflows through Roshan Digital Account (RDA) reaching USD2.1bn in 11MFY21, and v) The government starting the audit of all oil refineries and oil marketing companies (OMCs). Top performers of the market included i) PSEL (+31.3%WoW), ii) FABL (+20.3%WoW), iii) AGP (+15.0%WoW), iv) NESTLE (+12.8%WoW), and v) BNWM (+8.1%WoW). Meanwhile laggards included: i) EPCL (-13.2%WoW), ii) GATI (-10.7%WoW), iii) SCBPL (-9.8%WoW), iv) HCAR (-9.2%WoW), and v) HGFA (-7.9%WoW). Flow wise, foreigners remained net sellers with an outflow of USD18.6mn, followed by Banks/DFIs with a net sell of USD3.76mn while Individuals remained on the buying side with a net buy of USD12.86mn. Volume leaders during the week were i) TPL (174.7mn), ii) TELE (154.4mn), iii) GGL (124.8mn), iv) WTL (120.43mn), and v) ANL (93.5mn). 

Outlook

The market is likely to continue the momentum gained in the last few trading sessions where particularly technology sector is expected to remain in limelight while additional interest can be witnessed in stocks newly added to MSCI list. After being downgraded to Frontier markets, next big checkpoint remains IMF board’s approval of next review where a successful review can instill optimism in the market. We continue to advocate building positions in thematic plays such as in Cements, Steel, and Construction-Allied, and Textiles (on currency devaluation).

AKD Research