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Stock Smart Weekly (Sep 25, 2020)

StockSmart                       

Weekly Review                                

Happenings over the political front (leading opposition parties taking tough stance on establishment in the APC) together with rollover week pressure and rising COVID case count have strengthened bears in the outgoing week, with benchmark KSE-100 index losing another 803pts to close at 41,701pts (down 1.89%WoW). The market activity also witnessed contraction, with average daily trading volumes falling by 13.4%WoW to 465mn shares. The activity however was concentrated in high beta speculative stocks, where UNITY (210.4mn shares), SILK (202.1mn shares), HASCOL (165.2mn shares), KEL (130.8mn shares) and ASL (125.5mn shares) were the volume leaders. Amongst the major sectors, E&Ps lost 5.8%WoW in wake of declining international oil prices (-1.6%WoW), followed by power sector which saw 2.8%WoW decline due to lack of clarity on payment of outstanding dues. Commercial banks came under pressure following the MPC’s decision to hold rates in the recent monetary policy announcement, with a dovish guidance from the central bank delaying market expectations for rate hike. Cement sector corrected 1.8%WoW due to concerns over an active competition commission investigating the recent hike in cement prices. On the flip side, textile composite was major outperformer, gaining 2.6%WoW on continuation of subsidized tariffs and sector scaling back to pre-Covid-19 level of full-capacity. Other major macro news flows during the week included: i) country’s external balance recording another of surplus of US$297mn (vs. a deficit of US$601mn in Aug’19) on account of 18%YoY reduction in trade deficit and 24%YoY higher remittance flows, ii) the GoP raising PkR520bn through auction of MTBs, with the cut-off yields of 7.13%/7.18%/7.31% on 3/6/12m paper, respectively, and iii) SBP further easing restrictions on imports, withdrawing 100% cash margin requirement on the import of certain raw materials to support manufacturing and industrial sectors. Performance wise, top gainers amongst the KSE-100 constituents were i) ILP (+12.5%WoW), ii) SHEL (+6.8%WoW), iii) DAWH (+6.6%WoW), iv) ATLH (+5.1%WoW), v) NCL(+3.0%WoW), while i) TRG (-8.7%WoW), ii) ANL (-7.7%WoW), iii) OGDC (-7.3%WoW), iv) COLG (-6.8%WoW), and v) PPL (-6.4%WoW) were the major laggards.

 

Outlook

 

The market may take some respite in the upcoming week, as the selling pressure eases following rollover week. With earnings season in full swing, the stock specific movement cannot be ruled out. Major names slated to announce their earnings next week include GATM, SHFA, SPL, OGDC, SEARL, and UNITY. On the macro side, inflation reading for Sep’20 will be keenly watched number, where higher than expected reading could draw interest in the banking sector. AKD Research expects the headline inflation to marginally increase to 8.30%YoY (vs. 8.21%YoY in Aug’20 and 11.38%YoY in the SPLY) on account of increase in certain food items.

AKD Research