EUR 13.69 For Business Accounts Only

Stock Smart Weekly (Sep 17, 2021)

StockSmart                       

Weekly Review                                

In contrast to last week, the outgoing week saw immediate reaction of investors in form of panic selling over Pakistan’s reclassification to MSCI Frontier index. The average daily turnover declined by 6.7%WoW to 400mn shares where as the benchmark KSE-100 index slipped 562pts, declining by 1.2%WoW to close at 46,636pts over rising concerns of the upcoming IMF review and continues decline of PkR-US$ parity where the local currency hit an all-time low of PkR170/US$. Hence, the investors remained on their toes due to the rising production costs while recent govt. interventions to control the prices further irked inventors over the weakening power of corporates to pass-on the costs to consumers. In addition to this, the market sentiment reflected the concerns over the upcoming monetary policy on Monday. Finally, the news over current account deficit rising 81%MoM to US$1.48bn ignited a new wave of worries over deteriorating economic conditions, further fueling the selling pressure in Friday’s closing session, completely ignoring the 10%YoY increase in remittances in 2MFY22. Other news flow during the week included; i) LSM output declining 4.5%MoM, ii) massive increases in POL prices, iii) lack of incentives in refinery policy, iv) Head of US Delegation to FATF arriving in Pakistan, v) PSX winning the best Islamic exchange award, and vi) Reduction of ACD on auto sector. Top performers of the market included i) FABL (+10.4%WoW), ii) AKBL (+10.1%WoW), iii) SCBPL (+9.6% WoW), iv) UBL (+6.9%WoW), and v) HMM (+6.0%WoW). Meanwhile laggards included: i) ISL (-12.0%WoW), ii) COLG (-10.8%WoW),  iii) INIL (-9.1%WoW), iv) POL (-8.7%WoW), and v) PIOC (-8.0%WoW). Flow wise, Individuals remained net buyers with an inflow of US$16.8mn followed by Banks/DFIs (US$7.3mn), Insurance companies (US$0.9mn) whereas foreigners remained net sellers with an outflow of US$10.9mn followed by Companies (US$6.4mn), Brokers (US$5.6mn) and Mutual Funds (US$2.2mn). Volume leaders during the week were i) BYCO (172.52mn), ii) WTL (146.41mn), iii) TELE (145.91mn), iv) TPL (91.26mn), and v) TRG (75.27mn).

Outlook

We expect the market to remain range bound in upcoming week as the 6th IMF review approaches whereas the MPS meeting by SBP is expected to keep the investors on their toes. Although we expect SBP to maintain status quo, the possibility of 25bps hike cannot be ruled out which may result in a slight decrease in benchmark index as an immediate reaction. We continue to like building positions in thematic plays such as in Cements, Steel, and Construction Allied whereas any dip in the Auto sector represents a buying opportunity.

AKD Research