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Stock Smart Weekly (Dec15, 2023)

StockSmart                            

Weekly Review                                

After an impressive two-month run, the KSE100 index experienced a slight correction, losing 0.14%WoW to close at 66,130pts. State Bank of Pakistan in its MPC meeting, maintained the interest rate at 22%, aligning with market expectations. Furthermore, foreign investors continued their bullish stance on Pakistan, highlighted by the news of Saudi Aramco acquiring 40% of GO Petroleum Ltd. On the external front, officials anticipate a US$4.5bn inflow from multilateral and bilateral partners (excluding IMF), while the country has net external obligations of US$6.8bn pending in the remaining 7 months, including a Eurobond of US$1.0bn maturing in April ’24. With expectations aligned, including rollovers and inflows, Pakistan is anticipated to meet all external obligations in the current fiscal year. Record-high interest rates keep investors favoring fixed-rate investments, evident in oversubscribed first ever sukuk auction by PSX (PkR478bn received bids vs. PkR30bn target). Moreover, Remittances of US$2.25bn in Nov’23 (↑3.6%YoY) are likely to keep current account balance in control.

Encouragingly, market participation remains strong, with daily traded volumes averaging 1.25bn shares (↑22%WoW). On the currency front, the Pakistani Rupee gained 0.22%WoW against the US Dollar, closing at PkR283.25/US$ at week-end. Other major news flows during the week included; 1) World Bank says external debt stocks at $126.942bn by end 2022, 2) Fitch maintains Pakistan’s rating at 'CCC', sees political volatility, 3) Gas tariff increase fails to cut Pakistan’s Rs2.8 trillion circular debt pile, 4) RDA inflows hit record high of $7.035bn, 5) Car sales rise 5pc m/m, but fall 65pc y/y in November, 6) Advances to Deposit Ratio (ADR) records decline in November 2023. Sector-wise, Automobile, Transport, and Leasing companies were amongst the top performers, up 16.4%/10.2%/8.2%WoW respectively. On the other hand, Leather & Tanneries, Woollen, and Textile weaving were amongst the worst performers with a decline of 2.7%/1.2%/0.3.%WoW. Flow wise, major net selling was recorded by Insurance companies with a net sell of US$5.6mn. On the other hand, Foreigners absorbed most of the selling with a net buy of US$13.1mn. Company-wise, top performers during the week were, i) PTC (up 45.2%WoW), ii) BOP (up 32.6%WoW), iii) PIBTL (up 30.0%WoW), iv) PAEL (up 22.2%WoW), and v) KEL (up 18.3%WoW), while top laggards were, i) HCAR (down 10.5%WoW), ii) EFUG (down 9.4%WoW), iii) MEBL (down 9.2%WoW), iv) GHGL (down 9.1%WoW), and v) NRL (down 8.0%WoW).

 

 

Outlook

Market is poised to sustain a positive trajectory, although can face deceleration in the bull rally. Our optimistic outlook finds support in robust Foreign Direct Investments (FDIs) and active market participation. Furthermore, upcoming elections hold pivotal significance, and their successful conclusion could further elevate investor confidence. Our advice to investors is to retain long-term positions in companies with solid fundamentals, meanwhile exercising prudence in dealing with any fundamentally weak entities through a timely profit-taking approach. Moreover, companies with robust dividend yields, particularly in the Banking, Energy, and Fertilizer sectors, present opportunities for accumulation.

 AKD Research