EUR 13.65 For Business Accounts Only

Stock Smart Weekly (Dec 08,2023)

Weekly Review                                 

Throughout the week, the benchmark index maintained its upward momentum, reaching new highs as the KSE-100 demonstrated a series of peaks before settling at 66,224pts (↑7.35%WoW), marking its highest closing level. The week commenced with positive news regarding the IMF's positive expectations for the country, anticipating an increase in SBP-held reserves to US$9.0bn by fiscal-year end (Current: US$7.0bn). Further positivity ensued with the finalization of the BIT agreement and increased likelihood of a similar outcome for the FTA agreement with GCC. Towards the end of the week, the inclusion of Pakistan in the IMF's executive board meeting on Jan 11, 2024 provided an additional boost. Amidst these positive developments, there was a significant surge in participation, with the weekly avg. traded volume totaling 1.02mn shares (↑64%WoW). Additionally, with FED rates at their peak, international investors are exploring alternative options, and Pakistan, being the cheapest market in the region (at a forward PE level of ~4-4.5x), is gaining the confidence of foreign investors, reflected in a weekly FIPI inflow of US$11.2mn

On the currency front, the US$/PkR exchange rate closed at 283.87, depicting an increase of 0.39%WoW. Furthermore, SBP held Fx reserves fell by US$237mn to stand at US$7.0bn as of Dec 1, 2023, (↓3.3%WoW). Other significant news flow throughout the week include 1) FY25 budget likely to be Rs16.50tr, 2) Govt. domestic debt rises by 23.4%YoY to Rs41tn in Oct 3) OMC sales rose by 9%MoM to clock in at 1.37(MTs) in Nov 4) Discos’ tariff for Oct raised by Rs3/unit 5) SNGPL seeks 137pc increase in prescribed gas price 6) Nov cement dispatches down 2.12pc YoY. Sector-wise, buying was observed in refinery, emerging as the top performer (↑18.28%WoW), while Woolen sector experienced significant selling (↓8.39%WoW). Notable flows included major selling by BANKS/DFI with a net sell of US$13.02mn, countered by Foreigners, which absorbed selling with a net buy of US$11.15mn. Among companies, top performers for the week were i) KEL (34.7%WoW), ii) PTC (34.6%WoW), iii) NRL (25.7%WoW), iv) PSO (21.5%WoW), and v) SRVI (21.3%WoW), while top laggards were i) BNWM (8.4%WoW), ii) PGLC (4.5%WoW), iii) IBFL (4.1%WoW), iv) GADT (3.1%WoW), and v) LUCK (3%WoW).

 

Outlook

Looking ahead, we maintain an optimistic outlook on the market, anticipating the current rally to persist. Our positive stance is supported by the SIFCs' efforts to enhance current investment avenues, improving macro indicators, and the diminishing uncertainty surrounding the upcoming elections. However, we advise investors to maintain positions in companies with strong fundamentals and exercise caution regarding any fundamentally weak companies during the current Bull Run. Despite reaching record-high levels, the market still offers attractive valuations, with the forward PE at 4.8x. Moreover, companies with robust dividend yields, particularly in the Banking, Energy, and Fertilizer sectors, present opportunities for accumulation.