AKD Securities Limited – Stock Smart (06-12-2019)

Karachi, December 06, 2019 (PPI-OT): Weekly Review

Carrying on with the momentum gained in the last few weeks, KSE-100 witnessed a jubilant week, increasing by 1,444pts to 40,372pts (up3.7%WoW) – making it the 6th week in a row to have closed in positive. Improved macroeconomic conditions, particularly trade and current account balance, provided the initial push which was followed by Moody’s changing Pakistan’s outlook, to stable from negative, creating euphoria in the market and particularly banks. Though profit-taking and increasing coal prices weighed on cement stocks which dented the overall sentiment as well in second trading session of the week, market gained strength and even overlooked a higher than expectations CPI reading (12.7% vs. expectation of 12.3%), marching on to breach the 40k mark.

Other news flow impacting the market included i) State Bank of Pakistan (SBP) announced to hold auctions of various maturities of the market treasury bills and Pakistan Investment Bonds (PIBs) worth PkR2.85tn in next three months of FY20, and ii) State Bank of Pakistan paying USD1bn against sukuk (Islamic bonds), which was launched in November 2014 and matured on Dec 2. Activity during the week was at record levels with average daily volume standing at 467mn, up 38%WoW while foreigners remained net buyers (Net inflow at USD1.1mn vs. outflow of USD8.1mn last week). Top performers in AKD Universe were, i) PSMC (+21.86%WoW), ii) ABL (+12.12%WoW), iii) KEL (+11.90%WoW), iv) FCCL (+8.49%WoW), and v) NBP (+8.05%WoW), while laggards were, i) KAPCO (down 7.00%WoW), ii) GWLC (down 6.85%WoW), iii) HASCOL (down 6.72%WoW), iv) ENGRO (down 4.42%WoW), and v) PIOC (down 1.74%WoW).

Outlook

The expectations regarding beginning of monetary easing in near term will continue to drive the market, in our opinion where end of year adjustments by funds can spur activity in select stocks. However, after witnessing a rally of 14% in last one month, some cooling off cannot be ruled out as investors look to book profits. On the other hand, foreign activity may remain muted as we move closer to Christmas. In medium term, we believe, market will set its sight on the upcoming review of FATF where speculations regarding the outcome can keep market volatile.

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