AKD STOCK SMART, Feb 28, 2020
StockSmart
Weekly Review
Following global equities, KSE-100 index drained 5.6%WoW to close at 37,984pts as foreigners trimmed their positions (net sell: US$22.5mn) preferring safer assets amidst impact of spread of Coronavirus outside China on global growth outlook. Mutual funds followed suit with a net sell of US$11.6mn. The selling was absorbed by Insurance (Net Buy: US$25.3mn) and Banks/DFIs (Net Buy: US$7.8mn). Average volumes also improved to 173.5mn shares vs. 106.4mn shares in the previous week. Coronavirus fears overshadowed positive news flows relating to, i) Pakistan reaching staff level agreement with IMF, ii) FATF recognizing Pakistan’s efforts to fulfill action plan while extending timeline to Jun’20, iii) US Taliban on verge of signing deal where Pakistan’s contribution was widely acknowledged, iv) President Trump praising Pakistan in INDIA – indicative of close relationship between Pakistan and US, v) Govt. successfully addressing prices of food items in a bid to pull down inflationary pressures, and vi) Govt. gearing up to launch Sukuk-II for PkR200bn to address Circular debt that has reached PkR1.8trn. Sectorwise, OMCs and E&Ps were at the bottom of performance curve losing 9.3%WoW and 10.3%WoW respectively following slump in global oil prices (down 14.3%WoW). Top gainers within AKD universe were, i) CHCC (+4.6%WoW), ii) GWLC (+4.1%WoW), iii) MLCF (+3.0%WoW), iv) PIOC (+3.0%WoW), and v) DGKC (+1.0%WoW) whereas laggards were, i) HASCOL (down 16.0%WoW), ii) PPL (down 13.7%WoW), iii) KAPCO (down 13.3%WoW), iv) OGDC (down 10.5%WoW), v) PAEL (down 10.4%WoW).
Outlook
Market is expected to mimic global equities in the near term however, release of economic number relating to inflation (AKD expects inflation to clock in at 12.6%YoY in Feb’20 - market consensus: 13.3-13.6% - vs. 14.6%YoY in Jan’20) and MEFP report post IMF board meeting could provide short term boost to market performance. However, this should be taken as an opportunity to square positions since we believe market expectation of a rate cut is far-fetched considering Ramadan factor as well as Budget’21. In this backdrop, we continue to prefer Banks (UBL, MCB, BAHL, and BOP), Chemicals (particularly EPCL with ethylene following oil price trend), and Technology.
AKD Research
Kot Addu Power Co Ltd. Kot Addu Power Company Limited is a Pakistan-based power generation company. The Company's principal activities are to own, operate and maintain a multi-fuel fired power station with approximately 15 generating units with a nameplate capacity of 1,600 megawatts (MW) in Kot Addu, District Muzaffargarh, Punjab, Pakistan. The Company also sells the electricity produced therefrom to a single customer, the Pakistan water and power development authority. The power plant is a multi-fuel gas-turbine power plant using three fuels to generate electricity: gas, light sulfur furnace oil and high speed diesel. The plant's combined cycle technology enables it to use the waste heat from the gas turbine exhaust to produce steam in the heat recovery steam generator, which in turn is used to run the steam turbines.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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