Pakistan Strategy: Soggy August swamps sentiments, (AKD Daily, Sep 02, 2019)
- KSE-100/All index slipped 6.8/4.5%MoM despite a rise in trading activity (average monthly volumes +39.8/+61.0%MoM) for Aug’19, with incessant selling from institutional investors and terse outcomes from the meeting of the APG of FATF depreciative for investor sentiments.
- Amongst local investors, individual participation levels surpassed other participants with net buying of US$27.9mn was followed by Banks (US$8.2mn net buy) at a distant second place, while cumulative FIPI for the month amounts to a net outflow of US$3.5mn, contrary to July’19 net inflow of US$31.4mn.
- Equities performance could remain under stress in the short term given weak demand penetrating earnings profile of the corporates (particularly cyclicals - further opening-up valuations). That said, in medium-to-long run conditions are ripe for a bull-run given cheap valuations (FY20 Market P/E: 5.4x) and acknowledgment that the economic down cycle is near bottom.
- We remain apprehensive over recent measures to improve market liquidity, which we believe will prove inadequate compared to substantial macro reforms and clearances from international bodies (IMF review, FATF plenary and working group meetings on 13-18th Oct’19) for driving any sustainable bull run.
- Retaining our cautious stance, we advise building positions in Banks (cheap valuations / interest rate hikes yet to reflect on asset yields), Fertilizers (GIDC resolution/dividend yields), and select Power plays (cheap valuations/macro-hedged with capacity additions as major growth drivers).
AKD Research
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
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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