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Stock Smart Weekly (Nov 17, 2023)

Weekly Review

Market sustained its positive momentum and surged to record highs, with the KSE100 index closing at record high of 57,397pts on Thursday before a slight correction to close at 57,063pts on Friday, an impressive 3.02%WoW increase. The week centered on the IMF review, concluding with a successful staff-level agreement, anticipating a US$700mn inflow post-IMF Board approval. A major development was the govt.’s implementation of a 40% tax on banks' windfall income, meeting IMF demands and to agree on further revision in the gas prices in Jan’24. Moreover, there was a noteworthy increase in remittance numbers, surging to Oct’23 vs US$2.21bn in the previous month. In addition, international oil prices experienced a considerable ease, attributed to increased US strategic reserves and reduced demand from China. Presently, WTI/Brent hovers around US$74.1/78.9 per barrel.

Market participation witnessed a substantial improvement, with an avg. traded volume of 687mn shares, marking a 26%WoW increase from the previous week's avg. of 544mn shares. Notably, Thursday saw participation cross the 1.0mn share mark for the first time in last 28 months. On the currency front, the rupee marginally appreciated by 0.19%WoW against the greenback, closing at PkR286.5/US$ on Friday. Other notable news for the week includes 1) MSCI keeps Pakistan’s Frontier Market Index unchanged, 2) Debt, liabilities soar to Rs78 trillion. 3) Bank deposits rise 18% year-on-year on high rates, currency crackdown, 4) Car sales plunge by 24%MoM in October, 5) UAE firms to invest $25bn in real estate industry. Sector-wise, Close-end Mutual Funds, Synthetic & Rayon, and Woollen were amongst the top performers, up 24.0%/21.7%/12.0%WoW respectively. On the other hand, Vanaspati & Allied Industries, Commercial Banks, and Textile Weaving were amongst the negative performers with a decline of 0.5%/0.5%/0.4%WoW. Flow wise, major net selling was recorded by Banks with a net sell of US$9.14mn. On the other hand, Foreigners remain bullish with a net buy of US$8.22mn. Company-wise, top performers during the week were, i) HGFA (up 26.0%WoW), ii) PAEL (up 22.7%WoW), iii) RMPL (up 21.3%WoW), iv) IBFL (up 20.8%WoW), and v) PKGP (up 19.6%WoW), while top laggards were, i) BIPL (down 7.6%WoW), ii) BAFL (down 6.7%WoW), iii) CNERGY (down 5.4%WoW), iv) PABC (down 3.9%WoW), and v) MEBL (down 3.6%WoW).

Outlook

Despite the benchmark index reaching record highs, the market remains at attractive valuations with a forward P/E of 4.2x and P/Bv of 0.8x. We maintain our positive outlook on the market owing to favorable economic developments like improving inflation and expected monetary easing in the current fiscal year. While the market is flourishing, we strongly advise market participants to avoid potential pitfalls and instead concentrate on companies with robust fundamentals. Furthermore, considering companies with healthy dividend yields can be a prudent strategy for navigating inflation safely.