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Stock Smart Weekly (Aug 27, 2021)

StockSmart                       

Weekly Review                                

KSE-100 remained under pressure during the week, apart from Monday, where the benchmark index crossed the much anticipated barrier of 48,000pts to close at 48,112pts (+512ptsDoD) but the weak sentiment of the market coupled with incessant PkR/USD depreciation (+0.9%WoW), geopolitical tensions in the region and uncertainty over talks with IMF continued to derail investor confidence during the rest of the week. The index, therefore, could not sustain the massive selling occurred during week and cumulatively loss 463pts (-0.97%WoW) to close at 47,137pts. Despite receiving US$2.7bn inflow under IMF’s SDR allocation (conditional, to be directed to COVID vaccine procurement), the surging import bill payments due to constant currency deprecation kept the market sentiment negative. Participation during the week remained strong with average daily traded volume standing at 384.1mn shares against 265.7mn shares witnessed during last week. Sector-wise, DAP price increased by PkR400/bag to PkR6,300 vs. landed cost of international DAP at PkR6,700/bag. Other major news flow during the week included i) Amid rising imports, the country posted a current account deficit of US$773mn in the 1MFY22 against a surplus of US$583mn in 1MFY21, ii) Pakistan’s energy sector circular debt reached PkR2.28tn in FY21 against PkR 2.15tn in FY20, showing a growth of +6.04%YoY in its flow, iii) IMF chief thanked Pakistan for helping in evacuation of fund staff and their families from Afghanistan after its takeover by Taliban, iv) CCoE approved power generation capacity expansion plan, v) Pakistan’s textile and clothing exports posted double-digit growth in 1MFY22 increasing by 15.61%YoY to US$1.41bn compared to US$1.27bn in 1MFY21, and vi) Pakistan’s overall budget deficit has risen to a staggering PkR3.4tn, equivalent to 7.1% of GDP, in FY21. Top performers of the market included i) PSEL (+14.6%WoW), ii) GSKCH (+10.9%WoW), iii) SYS (+10.4%WoW), iv) MEBL (+8.5%WoW), and v) ARPL (+8.2%WoW). Meanwhile laggards included: i) JLICL (-14.7%WoW), ii) SRVI (-13.4%WoW), iii) GADT (-11.1%WoW), iv) ANL (-10.1%WoW), and v) HGFA (-7.8%WoW). Top volume leaders included WTL (144.3mn), GGL (103.6mn), HUMNL (85mn), ANL (80.3mn) and BOP (75.8mn). Flow wise, other organization remained the major buyers with (net buy of USD3.49mn) followed by Mutual Funds (net buy of USD2.27mn) while Insurance Companies stood on the other side with (net sell of USD2.38mn) followed by Banks and DFI (net sell of USD1.52mn). 

Outlook

The market performance is likely to remain range-bound amid the political turmoil in Afghanistan, and uncertainty surrounding IMF review (likely to commence from Sep’21). However, from sectoral perspective, currency devaluation bodes well for Textiles and E&Ps while for import driven sectors like cement and steel, their ability to pass on cost further will be tested. Moreover, flow based movement on account of MSCI Review in Sep’21 will also impact market sentiment. For the upcoming week major results include, KOHC, HUBC and PSMC.

AKD Research