Karachi, August 05, 2022 (PPI-OT): Weekly Review

Bulls finally returned to the local market as the looming threat of a potential default on foreign debt eased off as a couple of friendly countries stepped forward to bail out Pakistan from the crisis situation. The monthly external trade numbers were also announced this past week where the trade deficit pleasantly surprised consensus estimates owing to larger than anticipated squeeze on imports. Consequently, the KSE-100 gained 4.85% to close at 42,096pts, amid significantly better volumes with average volume for the index recorded around 268.61mn shares (+78.9%WoW), as better investment outlook lured the investors back. On the downside, the monthly CPI inflation for Jul’22 were announced where the headline inflation clocked in at 24.9% as opposed to consensus estimates of 23.7%.

Major news flows during the week were i) GoP mulling to impose more taxes on industries, ii) Proposal being evaluated to revise petroleum prices weekly, iii) GoP rejects speculations about gas tariff hike, iv) China agrees to roll over US$2bn loan, v) GoP planning to auction 2100MHz spectrum, vi) Cement sales plunging by ~48% on construction slowdown, and vii) Ministry agrees to increase OMC margins. Sector-wise, top performing sectors were; i) Refineries (+13.3%WoW) ii) Auto Assembles (+12.4%WoW), iii) Engineering (+10.8%WoW), iv) Cable and Electrical Goods (+9.8%WoW), and v) Chemicals (+8.9%WoW), while the least favourite sectors were; i) Leasing (-5.4%WoW), ii) Close Ended Funds (-3.7%WoW), iii) Leathers and Tanneries (-3.7%WoW), iv) Tobacco (-1.3%WoW), and v) Sugar (-1.3%WoW). Stock-wise, top performers in the KSE-100 were; i) CHCC (+24.5%WoW), ii) THALL (+21.2%WoW), iii) MLCF (+20.4%WoW), iv COLG (+19.8%WoW), and v) HCAR (+19.3%WoW), while laggards were; i) PGLC (-16.2%WoW), ii) NCL (-13.9%WoW), iii) HGFA (-6.59%WoW), iv) FABL (-3.8%WoW), and v) FHAM (-2.2%WoW). Brokers and MFs were the largest buyers, building US$3.6mn while Banks and Individuals were the biggest sellers with a net sell of US$1.9mn

Outlook

We will have only three trading sessions in the upcoming week owing to public holidays, however, the market momentum will remain positive as we inch closer to IMF disbursing its next tranche of US$1.2bn. The currency market will also remain buoyant and PkR may gain further ground against the Greenback as the treat of immediate default has subsided to a great extent after friendly countries came forward to bailout Pakistan from a crisis situation. Consequently, import oriented sectors will remain in the limelight and may end up outperforming the market. We highlight Autos, Engineering and Refineries sectors to outperform in the short run. Investors are advised to closely track the result announcements and can build positions accordingly.