AKD Securities Limited – Stock Smart

Karachi, June 28, 2019 (PPI-OT): Weekly Review

Continuing with previous week’s trend, KSE-100 index lost another 3.5%WoW to close at 33,902pts. Apart from the regulatory tightening that has been the dominant factor hurting market performance for the past weeks, i) fiscal year-end phenomena (where historically market has remained under pressure), ii) exchange rate volatility (PkR/USD touched a high of 163.5 before closing at 159.5), and iii) revision in gas prices (up to 191%), impacted weekly performance. Concerns over tail risks have overshadowed the positives including the US$3bn commitment from Qatar in the form of deposits and FDI. Average volumes improved to 146.4mn shares vs. 124.8mn shares driven by year-end repositioning particularly by mutual funds (net sell: US$14.7mn).

Amongst the major sectors, resurgence of oil price (WTI +2.8%WoW) due to tensions in middle-east and currency devaluation failed to invigorate interest in E and Ps (down 4.97%WoW) while weak demand scenario for Cements and OMCs impacted respective sector performance (down 5.35%WoW and 5.42%WoW respectively). This is despite recovery in cement prices by PkR15-20/bag over the last week. Commercial Banks lost 2.6%WoW possibly on concerns over NPL accretion whereas fertilizers were down 2.6%WoW on gas price hike. Top performers in AKD Universe during the week were, i) FATIMA (+10.6%WoW), ii) EFOODS (+6.9%WoW), iii) KEL (+3.3%WoW), iv) KAPCO (+2.5%WoW) and v) INDU (+2.3%WoW), while i) PSMC (-18.6%), ii) GWLC (-11.2%), iii) NBP (-10.8%WoW), iv) PAEL (-10.8%WoW) and v) PIOC (-9.9%WoW) remained the worst performers.

Outlook

Market performance is likely to remain volatile in the upcoming week, taking cue from i) IMF board approval of US$6.6bn EFF facility to Pakistan, ii) Jun’19 inflation announcement which would indicate future course of interest rates, and iii) OPEC meeting which can impact global oil price movement. We advise investors to take at least two years investment horizon and follow macro themes (interest rate, exchange rate, and circular debt resolution) in picking investments and as such our preferred sectors are Banks, E and Ps, and selected Power and OMCs.

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