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Stock Smart Weekly (Nov 20, 2020)

StockSmart                       

Weekly Review                                

Continuing with previous week’s trend, KSE-100 index shed 0.94%WoW to close at 40,187pts where surge in COVID -19 cases (avg. positivity rate of 6.7% vs. 5.6% previous week) and announcement of smart/micro lockdowns in major metropolitan centres dampened market sentiments. Other major news flows during the week were, i) PTI forming Government in Gilgit-Baltistan following a strong showing in local elections, ii) finalization of templates for turning MOUs into revised PPAs for IPPs with the agreed upon timeline for finalization ending on Feb’21, iii) G-20 extending debt relief to affected countries to June’21, iv) IMF mission to arrive soon for engaging in talks with the Government relating to revenue mobilization and power sector reforms as steps to continue EFF facility, v) PSX exploring possibility of widening circuit breakers to 10%, vi) Current Account witnessing surplus for the 4th consecutive month in Oct’20, recording at US$382mn, and v) CCP hinting at anti-competitive practices of cement manufacturers. Avg. volumes also contracted to 171.2mn shares vis-à-vis 289.6mn shares in the previous week, indicative of uncertainty amongst market participants. Activity was tilted towards main boards with KSE-100/KSE-ALL avg. at 0.75x in the current week vs. 0.72x in the previous week. Volume leaders were, i) UNITY (81.8mn shares), ii) TRG (69.5mn shares), iii) MLCF (41.3mn shares), iv) KEL (38.1mn shares), v) SNBL (33.6mn shares). Amongst major sectors, E&Ps and OMCs lost 2.2%WoW and 1.8%WoW despite 4.1%WoW increase in Oil prices as investors opted for profit-taking, followed by Cements (down 1.2%WoW) and Autos (down 1.1%WoW) whereas in other sectors, Vanaspati and Allied Industries segment gained 5.1%WoW. Flow-wise, foreigners off loaded US$6.5mn while mutual funds followed suit with a net sell of US$6.6mn, which was absorbed by Individual and Companies with net buy of US$6.4mn and US$4.3mn respectively. Top gainers during the week were, i) ILP (+8.2%WoW), ii) NCL (+5.8%WoW), iii) UBL (+4.3%WoW), iv) EPCL (+3.7%WoW), and v) FABL (+2.8%WoW), while laggards were, i) COLG (down 8.0%WoW), ii) STJT (down 7.5%WoW), iii) NATF (down 7.4%WoW), iv) SYS (down 7.4%WoW), and v) DAWH (down 6.9%WoW).

 

Outlook

 

Market is likely to remain range bound in the near term as Govt. is expected to ratchet-up restrictions to commercial activity in a bid to curtail COVID-19 spread. Volatility should persist which would provide opportunities for application of short-term trading strategies while longer term accumulation is advised in case of sharp corrections. Our preference is tilted towards Banks (particularly top tier as expectation of resumption in dividend payouts could drive stock performance in these scrips), Textiles, Construction-related sectors, and Power.

AKD Research