EUR 13.65 For Business Accounts Only

Stock Smart Weekly (Jan 12,2024)

Weekly Review                                

The week unfolded amidst political uncertainties and speculations of election delays, tempering market optimism; however, positive macroeconomic developments provided a counterbalance. IMF's approval of the second tranche of US$700mn on Jan 11, 2024, injected momentum, driving the KSE100 index to close the week at 64,638pts (up 0.19%WoW) after an initial dip to 64,237 on the first day. While the approval of the IMF's second tranche was anticipated, the surprise was the absence of any comments on politics or elections. Additionally, a restrained trade deficit of US$1.7bn in Dec’23 and a 13% annual increase in remittances to US$2.38bn provide hope for another month of current account surplus, potentially reducing the 1HFY24 CAD to below US$1.0bn (5MFY24 CAD: US$1.16bn). Furthermore, KIBOR rates dropped to below 21% (from a peak of 24.5%) after falling yields in the last T-bill auction. IMF tranche approval along with a build-up in FX reserves (up by US$1.2bn last month) has led to a 0.37%WoW appreciation of the PKR against the greenback, closing at 280.36/US$. On the sectoral front, E&P remained in the limelight during the week due to the sale of the Reko Diq stake to KSA, and amendments in petroleum policy have kept interest alive in the sector.                                                    .
Market jitter led to a decline in investors' interests, resulting in avg. daily traded volumes to decline by 18.5%WoW to 560mn shares. Other major news flows during the week included 1) Pakistan asks UAE for USD2bn deposit rollover, 2) Banks’ deposits increase by 23% YoY to Rs27.7tr in December, 3) PIA sell-off, outsourcing of airports: Caretaker setup for speeding up process, 4) Car sales rise 5pc m/m, but fall 65pc y/y in November, 5) Equities get record $65m inflows in December. Sector-wise, Transport, Automobile parts, and Synthetic & Rayon companies were amongst the top performers, up 16.5%/15.4%/10.3%WoW respectively. On the other hand, CE Mutual Funds, Leather & tanneries, and Textile weaving were amongst the worst performers with a decline of 8.8%/3.9%/3.4%WoW. Flow-wise, major net selling was recorded by Banks with a net sell of US$4.9mn. On the other hand, Companies absorbed most of the selling with a net buy of US$6.4mn. Company-wise, top performers during the week were, i) PSMC (up 24.1%WoW), ii) IBFL (up 13.6%WoW), iii) PIBTL (up 11.5%WoW), iv) INDU (up 11.0%WoW), and v) MARI (up 9.0%WoW), while top laggards were, i) SML (down 9.4%WoW), ii) LOTCHEM (down 9.0%WoW), iii) HGFA (down 8.7%WoW), iv) FFBL (down 7.4%WoW), v) CNYERGY (down 5.7%WoW).

   

Outlook

Looking ahead, the upcoming election will continue to be in the limelight, and clarity on political uncertainties is expected to drive the market upward. Conversely, while any election delay may cause short-term market jitters, it is anticipated to eventually sustain its bullish momentum. We advise clients to view any market fluctuations as opportunities to accumulate stocks of fundamentally strong companies, particularly those with high dividend yields. Overall, the energy and cement sectors are expected to remain in focus, given the anticipated amendments in the E&P policy and the decline in international coal prices to a 5-month low at US$96/ton.