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Stock Smart Weekly (Dec 10, 2021)

StockSmart                       

Weekly Review                                

After taking a heavy beating during last week on the back of high trade deficit for Nov’21, market took a breather on the first trading session of the week while in the second session, the news of assistance from Saudi Arabia being deposited into SBP’s account provided some relief and the market rallied 1.3% during the session. However, towards later part of the week, market set its sight on the upcoming monetary policy meeting and remained under pressure on the expectations of an increase in interest rates while PkR also kept depreciating.  Among sectors, Oil and Gas Exploration remained among the top performers on the back of increasing oil after it was declared that COVID-19’s new variant, ‘Omicron,’ isn’t as contagious as it was initially assessed to be. Additionally, technology sector remained in the limelight with the sector almost immune to rupee depreciation and increase in interest rates. Cement and engineering, on the other hand, remained among the worst performers with both the sectors being cyclical in nature and are expected to be adversely affected from increase in interest rates. Overall, KSE-100 closed the week at 43,396pts, up 0.4%WoW. Other major news flow during the week were i) Cement sales increasing by 7%YoY to 4.82mn tons for Nov’21, ii) Government abandoning the proposal to ban the import of CBU vehicles and instead imposing a regulatory duty of up to 50% on import of CBUs for a certain time period, iii) NEPRA increasing KE’s tariff by PkR3.8/unit for Sep’21 under monthly Fuel Component Adjustment (FCA) mechanism, and iv) The Fitch Ratings agency anticipating further interest-rate hike for Pakistan. Flow-wise, foreigners stood at net sellers, drawing out US$1.0mn along with Mutual Funds (net sell: US$4.2mn) which was mainly absorbed by Others (US$3.9mn), and Companies (US$2.1mn). Stock wise, major performers were, i) STJT (+24.2%WoW), ii) TRG (+23.9%WoW), iii) PPL (+13.5%WoW), iv) HASCOL (+10.2%WoW), v) OGDC (+8.1%WoW), while laggards were, i) ANL (down 15.9%WoW), ii) PIOC (down 10.3%WoW), iii) HMM (down 8.1%WoW), iv) CHCC (down 7.6%WoW), and v) SHFA (down 7.4%WoW).

Outlook

Market will be keeping an eye on a number of data points where first will be the upcoming monetary policy meeting on 14th Dec’21 (Tuesday) where AKD Research expects an increase in interest rate of 125-150bps. Another important data point in near term will be the number for trade deficit where a decline in imports for Dec’21 will be a sigh of relief for the market. Overall, we continue to advocate from thematic plays which include Banks (on monetary tightening), Construction-driven sectors (Cements, Steel), and Textiles (on devaluations and strong export prospects).

AKD Research