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AKD Securities Limited – Stock Smart (November 11, 2022)

Karachi, November 11, 2022 (PPI-OT): Weekly Review

As the political noise in the country eased off considerably, the benchmark KSE-100 index posted a robust uptick, gaining 1,237 points during the week to clock in at 43,093 points (up 2.95%WoW). The uptick in index was witnessed amid healthy participation with the weekly average daily traded volume also jumping by 8.8%WoW to settle around 306.4mn shares, as opposed to 281.5mn shares witnessed last week. Stability also returned in the FX market during the week with PkR holding its ground against US$ at 221.6, appreciating by 20bps WoW.

The newfound stability in PkR comes amid a hefty depletion in country’s official FX reserves which declined by US$956mn as the country made repayments on its international debt. Major news flows during the week were; i) SBP takes big step to contain forex outflow, ii) Cabinet approved $900m escrow account for Reko Diq in March, iii) Bank Alfalah plans to buy back 200mn shares, iv) DFML to start assembling LCVs, v) Q1 fiscal deficit soars to 1pc of GDP from 0.7pc of GDP YoY, vi) Cement, CNG, fertilizer sectors to face gas shortage in winter and vii) FBR chairman rules out any new tax amnesty. Sector-wise, top performing sectors were; i) Leasing Companies (+21.6%WoW) ii) Vanaspati and Allied (+9.5%WoW), iii) E and Ps (+6.8%WoW), iv) Refineries (+6.0%WoW), and v) Technology (+4.7%WoW), while the least favourite sectors were; i) Miscellaneous (-7.8%WoW), ii) Sugar (-1.2%WoW), iii) Textiles (-1.2%WoW), iv) Leather and Tanneries (-0.8%WoW), and v) Woollen (-0.6%WoW). Stock-wise, top performers in the KSE-100 were; i) PGLC (+72.6%WoW), ii) TRG (+14.6%WoW), iii) FABL (+13.8%WoW), iv) PPL (+12.9%WoW), and v) BAFL (+11.1%WoW), while laggards were; i) PSEL (-17.0%WoW), ii) SHFA (-5.2%WoW), iii) SCBPL (-2.6%WoW), iv) ILP (-1.2%WoW), and v) FFBL (-1.1%WoW).

To five volume leaders for the week were i) WTL (100.5mn), ii) HASCOL (83.4mn), iii) CNERGY (51.3mn), iv) DFML (43.8mn) and v) FFL (42.6mn). Flow-wise, Mutual funds and banks were the largest buyers in the market during the week, with net buys of US$3.6mn and US$3.0mn respectively. While Foreigners and Insurance Companies were major sellers, with the cumulative net sells of US$4.7mn and US$6.0mn respectively. The foreign outflow was largely concentrated in sectors namely Banks (US$5.31mn) and Technology (US$1.05mn).

Outlook

After a relatively stable week for the currency, PkR may yet again come under pressure as official reserves posted a spectacular decline during the week while the inward remittances also slowed down significantly, falling by ~9%YoY during the month of Oct’22. On the political front, the things may start heating up once again as country’s largest political party starts its long march once again. Both these factors may yet again prove to be market dampeners and the resurgence that the market showed during this past week may fizzle out once again and the index may see a renewed selling pressure. We advise the investors to maintain trading positions only and refrain from building and holding long term positions in the market.

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