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Stock Smart Weekly (Aug 04,2023)

StockSmart                            

Weekly Review                                

This week started on a very optimistic note, with the market accelerating by ~958pts from the beginning, and closing at 48,035pts by day end. This was majorly driven by the SBP’s decision to keep policy rate unchanged at 22% despite the market expectations of an increase. Moreover, positive sentiments encircling Finance Ministry’s expectations of “eased out” inflation during July and to stay within 25-27% further contributed to market being optimistic on Monday. On the contrary, CPI figures announced on Tuesday materialized to 28.3% YoY and negated the original statement made by the Finance Ministry. Moreover, trade deficit decreased from $1,863mn in June 2023 to $1,607mn in July 2023. The index remained bullish on Wednesday with a gain of 534pts and settled at 48,765pts and then cascaded again to 48,611pts after staying volatile on Thursday. Overall, the KSE-100 index ended gaining 1,509pts (3.20% WoW) during the week and closed at 48,586pts while transcending to 48,765pts on Thursday. The market capitalization this week is PkR 7,290bn increasing from PkR7,097bn last week. Moreover, average daily turnover jumped from 125.64mn shares to 391.82mn shares, reflecting a sharp increase in market participation by 211.9%. FX Reserves held by SBP decreased from $8,186mn to $8,154mn and the total liquid FX reserves declined from $13,534mn to $13,464mn as of 27th July 2023 where the decline of $32mn is attributed to repayment of debt. Other notable news for the week include 1) PM Shahbaz Sharif announced the dissolution of the National Assembly to take place on 9th August, 2) July textile exports down 15pc to $1.31bn YoY, 3) PSX prepares for Symmetry Group’s IPO, 4) Chinese Exim bank rolled over $2.4bn which are due in next 2 fiscal years, 5) July cement          despatches rise 57.44pc to 3.212MT YoY, and 6) Senate passed a bill allowing the establishment of state-owned Pakistan Sovereign Wealth Fund. Sector wise, Modarabas/Sugar and Allied Industries/Chemical have been worst performers, declining by 5.7%/3.6%/3.6% on a weekly basis, whilst Close-Ended Mutual Fund remained an anomaly clocking a 21.9% gain. Company-wise, top performers during the week were, i) HGFA (↑23.0%WoW), ii) CNERGY (↑17.9%WoW), iii) OGDC (↑17.4% WoW), iv) POML (↑16.0% WoW), and v) THALL (↑15.2%WoW), while top laggards were, i) COLG (↓6.2%WoW), ii) UBL (↓4.2%WoW), iii) FABL (↓2.3%WoW), iv) YOUW (↓2.3% WoW), and v) CEPB(↓2.2%  WoW). Flow-wise, major net selling was recorded by Mutual Funds with a net sell of US$5.97mn. On the other hand, Companies absorbed all of the selling with a net buy of US$8.82mn.

 

Outlook

After staying positively bullish throughout the trading session last week and this week, the Index dropped to 48,586pts from being 48,611pts the preceding day. The market is likely to stay positive given the strengthening of macros and the receipt of Chinese loan rollovers worth $2.4bn. Market participants are advised to implement a cautious approach when investing while focusing on dollar denominated revenue stream companies like E&Ps and Technology to hedge against currency risk or in companies with healthy dividend yields.

 

AKD Research