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AKD STOCK SMART, Nov 29, 2019

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Weekly Review                                

Regaining momentum lost during the first half of the week, the KSE-100 returned 3.6%WoW managing to counter the rise in political noise and managing to attract significant participation (avg volumes up 5.1%WoW). Expectations of a peak interest rate cycle, coupled with improving macro indicators (particularly on the external front) managed to keep investor sentiment buoyant, supported in part, with the aid of healty mutual funds participation. Key news flows driving sentiment included: 1) the monetary policy committee of the SBP kept discount rates unchanged at 13.25% due to high inflationary pressures, warning that inflation could rise beyond the target set for the current fiscal year, 2) the Supreme Court Thursday granted six-month extension in the service of Army Chief General Qamar Javed Bajwa after the government gave an undertaking assuring the court of proper legislation within six months specifying the terms and conditions of service of the army chief, 3) on a surprise trip to Afghanistan on Thursday, President Trump said the United States had reopened peace talks with the Taliban — just three months after the president scuttled negotiations, 4) forex reserves held by the SBP rose US$240mn to US$8.6bn due to official inflows, the SBP said while foreign exchange reserves held by commercial banks fell to US$6.8bn from US$7.0bn, and 5) NEPRA on Tuesday allowed ex-Wapda Discos to transfer the burden of PkR14.7bn (14.56 paisa per unit) to the power consumers on account of power purchase price adjustment for 1QFY20. Price performance was exhibited across the AKD coverage cluster, with top performers including: 1) FCEPL (+14.9%WoW), 2) GWLC (+14.1%WoW), 3) FFBL (10.2%WoW), 4) PSMC (+10.2%WoW), 5) HASCOL (+10.2%WoW), 6) MLCF (+10.2%WoW), and 7) EFERT (+8.9%WoW). Volume leaders during the week included: 1) UNITY (131.1mn shares), 2) BOP (103.1mn shares), 3) PAEL (98.9mn shares) and 4) FFL (89.8mn shares).

 

Outlook

While medium term triggers are centered around policy initiatives to be taken by the GoP (circular debt clearance, GIDC proceeding outcomes), key events to look for in the month of December include 1) approval of release of funds and release of IMF’s first staff level review report under the current EFF program and 2) result of second OPEC’s semi-annual meeting for 2019 where any consensus on supply could sway crude prices. Factoring these, overall index performance can remain under pressure, however, news flows regarding possible mini-budget (in accordance with strict fiscal targets of the IMF program) could drive performance in select domestic industries (chemicals, construction, steel).

 

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