EUR 9.34 For Business Accounts Only

AKD STOCK SMART, Jan 24, 2020

StockSmart                       

Weekly Review                                

After 4 consecutive sessions of retreat, KSE-100 index staged a rebound on the last day (+126.08pts) to close the week at 42,633pts (down 1.24%WoW). The market remained under pressure on expectations of, i) inflation likely crossing 13% mark in Jan’20 putting on hold expectations of interest rate cut in MPS meeting (AKD expects Jan’19 inflation at 13.6% - a 9y high), and ii) potential gas price hikes where authorities’ decision to reduce GIDC to PkR5/bag from PkR405/bag added to the uncertainty particularly in the Fertilizer sector. Investors also remained on the sidelines (Avg. volumes diminished to 186.7mn shares, down 20.2%WoW) due to lack of triggers while awaiting for the outcome of FATF joint group meeting in Beijing. Amongst other news flows, i) current account deficit narrowed 75%YoY to US$2.15 billion in 1HFY20, ii) foreign investment in treasury bills reaches record US$2.2bn, iii) Incentive package for small electric vehicles, buses on cards (SAZGAR consequently announced launch of EV three wheeler), and iv) Half-yearly uplift spending rises to 55pc of allocation. Foreigner stood out as net buyers (US$2.8mn) which together with banks (net buy US$2.3mn) absorbed profit taking by Individuals (net sell US$2.2mn) and Insurance (net sell US$2.8mn). Sector wise, Cable and Electrical Goods (down 4.4%WoW) and OMCs (down 3.8%WoW) witnessed major declines where the latter came under pressure due to below expected result of APL possibly on inventory loss. This was followed by Fertilizers (down 3.4%WoW), Engineering (down 2.7%WoW) and Autos (down 2.0%WoW). Within AKD Universe top performers were, i) NML (5.2%WoW), ii) CHCC (4.1%WoW), iii) FFC (3.5%WoW), iv) PIOC (2.84%WoW), and v) FFBL (2.4%WoW) while laggards were, i) HASCOL (down 11.9%WoW), ii) APL (down 10.1%WoW), iii) HMB (down 8.31%WoW), iv) EFERT (down 8.0%WoW), and v) ENGRO (down 6.1%WoW).

 

Outlook

The market performance in the upcoming week shall be governed by positive outcome of Pakistan and FATF joint group meeting where Pakistan’s efforts were widely acknowledged as per news flows, and MPS meeting on Jan 28, 2020. The MPC of the central bank with its singular focus on inflation will likely not move the needle in the upcoming MPS, as per our view. Pressure would also be exacerbated by portfolio realignment as a result of roll-over week. We advise investors to accumulate banks, power and textiles.