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Stock Smart Weekly (Jul 27,2023)

StockSmart                            

Weekly Review                                

The outgoing week continued its bullish run, with the KSE-100 starting the week at 45,920.73pts, continuing the move upwards to close at 47,076.99pts (1,156.26pts, 2.5%WoW). Investor sentiments remained positive after the approval of the IMF SBA and a move towards the general elections. Average traded volumes were 125.64mn compared to 325.12mn shares last week, down by 61.4%. The PKR-USD parity remained stable during the week, with the PKR appreciating by a mild 0.13%WoW to close at 286.45. Further, results’ announcements continued during the week for the period ended June-23, where several companies posted below par performances mainly owing to the lingering global and local economic headwinds resulting in record high interest rates, deteriorating exchange rate, imposition of supertax, amongst other reasons. Furthermore, monetary policy is scheduled for the 31st of July with market consensus remaining at a 100bps hike. In other positive news, 5 SOEs have signed a MoU to finance their 30% portion in the development of a Greenfield refinery project along with Saudi Aramco, and establishment of a Sovereign Wealth Fund worth PkR2.3tn by including 7 SOEs (where UAE has shown interest in acquiring shares) to fund capital investments. Abu Dhabi Investment Authority has provided technical assistance to finalize the law. Other news for the week were; 1) Oil remained higher owing to production cuts amidst sluggish demand from China; 2) Pakistan has to repay US$2.44bn for the month of July’23; 3) PkR7.50 per unit power tariff hiked, barring consumers using up to 200 units and partial subsidy for consumers up to 300 units; 4) Prolonged wet spell threatens cotton crop recovery; 5) POL products worth $1.182bn imported on deferred payment basis from Saudi Arabia; 6) Petroleum dealers, govt. agree on margins increase by PkR1.64 per liter; 7) US FED may hike interest rate by 0.25bps. Buying was witnessed sector wise Close-End Mutual Funds as the top performer recording gains of 13.5%WoW, whilst Jute declined by 8.5%WoW. Flow-wise, major selling was recorded by Mutual Funds with a net sell of US$5.98mn. On the other hand, Other Organization absorbed most of the selling with a net buy of US$5.22mn. Company-wise, top performers during the week were, i) HGFA (22.7%WoW), ii) AICL (18.1%WoW), iii) HBL (16.3% WoW), iv) NBP (16.0%WoW), and v) SHEL (15.9%WoW), while top laggards were, i) SML (16.8%WoW), ii) BNWM (6.5%WoW), iii) DAWH (5.4%WoW), iv) MUGHAL (3.7%WoW), and v) ENGRO (1.8%WoW).

 

Outlook

In our opinion, the market shall maintain it’s positive uptick owing to news relating to Chinese loans rollovers, fresh funding from GCC and other bilateral allies, chances of political stability post general elections towards the end of the year and a possible re-entry into a bigger IMF program to address any lingering default concerns. However, it is imperative to see which direction the policy rate goes in the 31st July MPC meeting which will further determine market sentiments. 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.

 

AKD Research