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Stock Smart Weekly (Dec 17, 2021)

StockSmart                       

Weekly Review                                

Ending an otherwise volatile week, the KSE-100 index closed at 43,901pts, +1.2%WoW – the steepest performance in the past 4 weeks, with the catalyst being the forward guidance by the Central Bank. The Monetary Policy Committee (MPC) of the SBP delivered another 100bps hike, taking the policy rate to 9.75%, and communicated to “pause” monetary settings in the near term, expecting recent policy decisions to moderate demand pressures in the coming months. However, the sentiment was disturbed by the recently concluded TBILL auction with the cut-off yield remaining flat – reflecting a large divergence between the current policy rate and the yield. Avg. volumes also improved to 265.0mn shares vs. 203.8mn shares in the previous week. Other major news flows during the week were, i) concerns on potential delay in IMF program by a couple of weeks since authorities are yet to meet prior actions, ii) 5MFY22 remittances +10%YoY to US$12.9bn, iii) Car sales +62%YoY to 90,303 units in 5MFY22, iv) Govt. deciding to slash prices of POL products up to PkR7.01/ltr, v) large scale manufacturing index posting an uptick 3.6%YoY in 4MFY22, and v) Govt. mulling to increase base tariff by PkR0.95/unit. Sector-wise, within major sectors, Engineering and Techs gained 10.4%WoW and 10.3%WoW respectively whereas Commercial Banks remained the laggard with flat returns while overall sectoral performance was led by Textile weaving (+12.1%WoW) followed by Woolen (+11.3%WoW). Flow-wise, foreigners sold US$3.5mn attributable to strategic portfolio alignment in the context of faster-than-expected tightening by the US Fed, which was absorbed by Companies and Individuals with net buy of US$5.1mn and US$2.7mn respectively. Stock wise, top gainers were, i) KTML (+18.0%WoW), ii) UNITY (+15.6%WoW), iii) PIOC (+15.0%WoW), iv) ANL (+14.4%WoW), and v) CHCC (+12.1%WoW) while worst performers include, i) MUREB (down 7.7%WoW), SNGP (down 7.1%WoW), ATLH (down 6.8%WoW), MCB (down 4.2%WoW), and NESTLE (down 4.2%WoW).

Outlook

Market is expected to regain momentum in the coming weeks inspired by secondary market money market yields likely normalizing going forward (3M-1Y yields down 15-41bps today) and year-end phenomenon. Medium-term performance is likely to be governed by the IMF Executive Board’s approval regarding resumption of the program. We advocate for building positions in Banks, and Infrastructures (Cements, Steel, Construction-Allied).

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