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Stock Smart Weekly (Oct 23, 2020)

StockSmart                       

Weekly Review                                

Battling significant headline risk from the FATF plenary meeting vote for Pakistan’s status as a “jurisdiction with strategic deficiencies”, i.e. on the Greylist, the benchmark index rallied 2.7%WoW with major earnings beats across Banks, Cements, Fertz providing fuel to the rally which saw the KSE-100 index closed 41,266pts. Volumes spiked 57.3%WoW where major forces driving investor sentiment were: 1) long consumer cyclicals (Cements, Autos, Edible Oils) as an improving external situation and PkR stability eases cost pressures for import reliant sectors, and 2) earnings outperformance for the latest reported period (4QFY21/3QCY20) for Banks and Fertilizers, where resumption of payouts for Banks was a notable catalyst. Other developments during the week included: 1) Pakistan posted US$73mn current account surplus in Sept’20 compared to US$211mn in Aug’20, where on a cumulative 1QFY21 basis current account surplus of U$792m was achieved against a deficit of $1.5 billion recorded in 1QFY20, 2) The ECC approved supply of RLNG till the end of Nov’20, ensuring the supply of RLNG to fulfill the requirements of two fertilizer plants namely Agritech and Fatima Fertilizer, 3) Drug Regulatory Authority of Pakistan (DRAP) has fixed the maximum retail prices (MPR) of 253 drugs on the basis of its packing sizes with certain other conditions, and 4) Govt. has agreed to give tax concessions to Pakistan’s big retailers in return for their commitment to documenting their businesses. Volume leaders during the week were: 1) HASCOL (305.9mn shares), 2) UNITY (160.4mn shares), 3) KEL (140.2mn shares) and TRG (109.4mn shares). Stocks leading the index higher included, 1) UNITY (+20.7%WoW), 2) ATRL (+18.4%YoY), 3) CHCC (+14.2%WoW) while laggards included: 1) GATU (-7.3%WoW), 2) ABOT (-6.2%WoW), and 3) EPCL (-5.2%WoW).

 

Outlook

 

Todays plenary session outcome was noticeably favorable with FATF authorities accepting Pakistan’s policy actions to mitigate AML/CFT risks by reducing the number of Action Items to be addressed to 6 (from 13 previously) by Feb’21. Additionally, major companies reporting earnings over the coming week include NBP, PSO, FFBL, MCB and PAEL, amongst others, likely to keep volumes buoyant.

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