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AKD STOCK SMART, Sep 06, 2019

The market recovered 47% of its previous week correction, caused by poor results of HASCOL and potential privatization of index heavy weights E&Ps (PPL and OGDC). The KSE-100 closed the first trading session in green (up 1.3%), in anticipation of new methodology based inflation number for August 2019 to be lower than old methodology based inflation. While the market quickly lost steam in the following session, the Bulls came on the forefront mid-week, when PBS finally rolled out the new inflation methodology based on which headline inflation for Aug’19 stood at 10.5% YoY (11.6% based on older methodology). Lower CPI reading led the market gaining 899 points intraday (day high vs. day low), based on expectations of potential monetary easing doing rounds. The third trading session also witnessed withdrawal of presidential ordinance which was signed to waive off 50% of outstanding GIDC overdues from the CNG, power, fertilizer and industrial gas consumers. However, the market played down the newsflow, as high dividend yielding Fertilizer stocks remained buoyant, despite the negative development. The KSE-100 closed at 30,467 points, up 2.68% WoW. Major news during the week included: (i) SECP finalizes reforms agenda to revitalize capital, (ii) Non-resident firms to be given massive tax incentives to invest in Pakistan debt market, (iii) Crucial meeting of FATF to be held in Bangkok on September 9, (iv) GoP beats retreat on GIDC amnesty, (v) IMF to send SOS mission to Pakistan on 16th and (vi) Govt moves for early SC hearing on GIDC pleas. Top performers during the week included PPL (+9.52%WoW), OGDC (+8.61%WoW) and APL (+7.76%), while HASCOL (-22.55%), GWLC (-15.09%) and MEBL (-6.02%) remained the worst performers. Average daily turnover declined 24.9% WoW to 93mn shares. MLCF (7.17mn shares), WTL (4.58mn shares), OGDC (4.22mn shares), DGKC (2.66mn shares) and PAEL (2.64mn shared) remained major volume churners.

 

Outlook

The market sentiment will be swayed by any developments on macro level, where APG is expected to meet on 9th-10th Sep’2019 in Bangkok to discuss Pakistan's progress report. The meeting is expected to form the basis of a definitive decision on whether Pakistan remains on the grey list or is blacklisted. Furthermore, IMF delegation is expected to visit Pakistan the following week to discuss fiscal issues, as primary deficit for FY19 of 3.6% was widely different from 1.8% expected during the finalization stages of IMF deal. Sector-wise, GIDC settlement is expected to remain in news in the upcoming week. Meanwhile, major results include: PRL, HUBC, ASTL and NPL.

AKD Research