EUR 9.10 For Business Accounts Only

Stock Smart Weekly (Aug 18,2023)

StockSmart                            

Weekly Review                                

The outgoing week saw investor sentiments swaying in either direction owing to major developments on the political front. The caretaker set up was finally announced with ex Balochistan senator, Anwaar ul Haq Kakar taking charge as interim PM and slot filling in major cabinet positions by interim ministers. On the other end, general elections seem to be delayed owing to higher population numbers requiring fresh constituency delimitations. The interim government hiked fuel prices by PkR17.50/liter for petrol and PkR20.00/liter for high speed diesel, in line with global oil price hikes and IMF SBA requiring fiscal discipline. Further, hikes in power tariffs added to an already high inflationary environment, coupled with high interest rates have been hurting industrial output particularly the textile sector, which has been hit with added gas curtailments. Latest LSMI numbers stand at 114.83 for FY23, indicating a drop of 10.26%YoY. Further we saw the PkR under pressure against the US$ with the biggest issue being the spread between interbank and open market rate, reaching a level of ~4% against IMF set cap of 1.25%. The PkR stood at 295.78/US$ (↓2.46%WoW).The benchmark index opened the week at 48,424pts, settling at 48,218pts (↓205pts, 0.43%WoW). Average traded volumes were 175mn compared to 255mn shares last week, down by 31.50%WoW.Other news for the week were; 1) RDA inflows exceeded US$6.5bn, with accounts crossing 600,000; 2) Recovery of PkR24.5bn from KE consumers, through PkR1.52/unit surcharge imposition; 3) Central govt. debt soars by 21.38%YoY to PkR60.8tn in Jun’23; 4) Debt servicing reached PkR5.8tn; 5) Pakistan’s total debt, liabilities surge to PkR77tn in FY23; 5) SBP reserves up by US$12mn to US$8bn; 6) SNGPL based AGL and Fatima Fert (Sheikhupura plant) gas supply extended to Mar’24 to address urea production shortfalls; 7)PRL dismissed news regarding inability to manage Russian crude oil processing. Buying was witnessed sector wise in Automobile Parts & Accessories, emerging as the top performer recording gains of 5.5%WoW, whilst Woolen saw major selling declining by 2.9%WoW. Flow-wise, major selling was recorded by Banks/DFI with a net sell of US$3.89mn. On the other hand, Insurance companies absorbed most of the selling with a net buy of US$4.05mn. Company-wise, top performers during the week were, i) SYS (9.2%WoW), ii) PABC (7.3%WoW), iii) THALL (7.2% WoW), iv) JDWS (6.1%WoW), and v) AIRLINK (6.0%WoW), while top laggards were, i) LOTCHEM (7.9%WoW), ii) FCEPL (7.1%WoW), iii) CNERGY (5.7%WoW), iv) ENGRO (5.3%WoW), and v) BOP (4.9%WoW). Company wise total volume leaders were 1) YOUW at 57.54mn shares; 2) OGDC at 52.21mn shares; 3) DGKC at 48.15mn shares; 4) PPP at 41.38mn shares; 5) KHYT at 36.05mn shares.

 

Outlook

We opine the market to maintain its positive trajectory owing to a safe passage towards the caretaker setup. However, due to the IMF’s strict conditions with regards to fiscal discipline and a move towards the general elections, market performance may remain volatile with some cushion coming from bilateral/multilateral inflow commitments and elevated reserves’ level compared to prior periods. We reiterate our stance of following a cautious approach to stock picking and we continue to advocate dollar-denominated revenue stream scrips (Technology and E&P sector) to hedge against currency risk or high dividend yielding scrips.