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Stock Smart Weekly (Feb 09,2024)

Weekly Review                                

Although a short three-day working week, the weight of a momentous event loomed large—the elections. The week began with positive news of possible nods by the IMF on circular debt and power tariff rationalization plans, as well as a narrowed trade deficit for the month of January. However, uncertainty surrounding the election results on Friday shattered the early gains. Contrary to expectations, the initial outcomes largely favored PTI-backed independent candidates, resulting in the KSE100 plunging by 2.3kpts at the opening, before partially recovering to close the week at 63,003pts, with a loss of 59pts or 0.09%. As of the latest situation, a PDM-type government is expected to take office in the coming days.

Market participations remains lacked with investors seeking clarity over the election results, as avg. daily traded volume further shrunk this week by 2.3%WoW, averaging at 3.5mn shares. Furthermore, SBP-held Fx reserves declined by US$173mn to end at US$8.04bn as at Feb 2nd, 2024. On the currency front, PkR appreciated by 0.05%WoW to close at 279.41/US$. Other major news flows during the week included; 1) Auction for MTBs: Govt raises only Rs64bn against Rs480bn target, 2) CCoE approves amendments to refineries policy, 3) Exports of services shrink in December, 4) Govt borrows over Rs4 trillion from banks in seven months. Sector-wise, Synthetic & rayon, Paper & board, and Property were amongst the top performers, up 4.2%/2.0%/1.5%WoW respectively. On the other hand, Leasing companies, Transport, and Textile composites were amongst the worst performers with a decline of 5.2%/2.2%/1.3%WoW. Flow wise, major net selling was recorded by Mutual Funds with a net sell of US$5.5mn. On the other hand, Foreigners absorbed most of the selling with a net buy of US$5.7mn. Company-wise, top performers during the week were, i) PSEL (up 9.5%%WoW), ii) SML (up 7.1%WoW), iii) KTML (up 6.8%WoW), iv) YOUW (up 5.9%WoW), and v) IBFL (up 5.7%WoW), while top laggards were, i) PGLC (down 9.6%WoW), ii) AGP (down 5.0%WoW), iii) APL (down 4.9%WoW), iv) PIBTL (down 4.7%WoW), v) NATF (down 4.7%WoW).

    

Outlook

Market outlook would hinge on the end result of the elections, with indications pointing towards a PDM-like government. If this transition occurs peacefully, it could be positive for the market as it would boost investor confidence, especially considering previous efforts by a similar setup. Overall, the market is currently at levels with attractive valuations, boasting a forward P/E ratio of below 4x. However, we advise clients and investors to adopt a cautious approach and either maintain or take positions in mainboard stocks to limit risks.