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Stock Smart Weekly (Oct 08, 2021)

StockSmart                       

Weekly Review                                

Reeling from the previous week’s dejected performance, KSE-100 index continued its negative trajectory across the week, closing at 44,477pts. In the outgoing week, the index cumulatively lost 395pts or 0.9% where an upsurge in global commodity prices (Coal hit US$238/mt and Brent hit US$83.1/bbl during the week), widening trade deficit, and higher inflation (9% in Sep’21 vs 8.4% in Aug’21), played over market sentiments. In addition to this, the market sentiment reflected concerns over the upcoming IMF review and political uncertainties. Cement sector was among the major laggards for the week, losing 5.6%WoW as coal prices continue to trade near 10 year high amid increased demand for power generation in developed economies. Participation during the week remained dull with average daily traded volume standing at 265mn shares against 355mn shares witnessed during last week. Sector-wise, CRC prices increased by PkR4.8-5K/ton to PkR237-239K/ton. Other major news flow during the week included i) IMF asked Pakistan to take additional taxation measures in the shape of income tax, sales tax, and regulatory duty, ii) Govt. debt rose to PkR39.7trn (+11.5%YoY) in Aug’21, iii) Pakistan’s exports to Afghanistan fall sharply since Taliban takeover, iv) Cement sales dip 6% in 1QFY22, v) Russia to invite Taliban to international talks on 20-Oct’21, and vi) PSMC suspended bookings for Alto AGS, Cultus VXL and Cultus AGS. Top performers of the market included i) MARI (+14.6%WoW), ii) SEARL (+7.8%WoW), iii) COLG (+6.4%WoW), iv) UBL (+5.0%WoW), and v) MTL (+3.8%WoW). Meanwhile laggards included: i) NATF (-18.9%WoW), ii) PIOC (-11.8%WoW), iii) GADT (-10.8%WoW), iv) FFBL (-10.7%WoW), and v) CHCC (-10.5%WoW). Top volume leaders included WTL (133mn), TELE (127.3mn), UNITY (55.6mn), GGL (50.8mn) and BYCO (50.7mn). Flow wise, Individuals remained the major buyers with (net buy of USD7.13mn) followed by Mutual Funds (net buy of USD3.61mn) while Companies stood on the other side with (net sell of USD16.05mn) followed by foreigners (net sell of USD3.7mn). 

Outlook

Market direction is likely to be determined by upcoming result season, geopolitical situation and most important IMF review where formal talks are expected to take place in the next week. The Govt. appears to be formulating strict measures to increase tax base. Moreover, gas and electricity tariff hikes are on the cards as well. Market participants should look to invest in the Banks where possibility of further interest rate hikes could bring the sector into limelight while Techs and Textiles (on currency depreciation) and Cements (coal prices started to ease off) are other sectors of interest. To this end, major results in the next week include, EFERT, MEBL, EPCL and HBL.

AKD Research