Pakistan Strategy: Mapping the road beyond 40K, (AKD Daily, Aug 24, 2020)
AKD Daily
Pakistan Strategy: Mapping the road beyond 40K
- Posting a stellar run, the KSE-100 index climbed back 45.5% from March’20 lows, within spitting distance (8.3%) from CYTD high hit on Jan, holding steady near the 40K mark, beating back lack of clarity regarding earnings outlooks, business disruptions amidst the COVID-19 pandemic and societal costs associated with it
- We map out the building blocks of market valuations, earmarking sectoral performance and tangible improvements to macros as major factors supporting the benchmark index’s upswing, where continued positivity should remain a factor of fundamentals
- Additionally, an element of “buy on rumors, sell on news” can be attributed to significant performance in retail favorite, low weight sectors where the fifteen low weighted sectors have, with the exception of four sectors, are higher than they were at the CYTD index high, showcasing exceptional strength.
- The key positive on the macro front is continued improvement in the external balance, with CAD narrowing 94%YoY to mere US$514mn (0.3% of GDP) in 7MCY20, where recent improvements are largely due to record high inbound remittances, which are difficult to sustain over the long term due to the one-off nature of the recent increase. Additional stressors on the horizon include (quasi)fiscal weaknesses requiring unpopular decisions.
- In this backdrop and sticking with our house call for long term buy-and-hold strategies, we like HBL and UBL in banks whereas OGDC is our top pick in our E&P universe. Additionally, we continue to like LUCK and MLCF despite having recorded decent run-ups in stock performance.
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Maple Leaf Cement Factory is engaged in the production and sale of white cement, grey cement and clinker. Co. is a subsidiary of Kohinoor Textile Mills Limited.
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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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