Karachi, November 01, 2021 (PPI-OT): KSE100: Late recovery leads to positive closing in Oct-2021

The KSE100 Index showed some recovery in the month of Oct-2021, posting 2.9% MoM returns in PKR term. However, with PKR depreciating against the US$ by 1.4% MoM, US$ returns clocked in at 1.5% MoM. With this, the YTD FY22 losses reduced to 2.5%/11.2% in PKR/US$ terms, respectively.

The recovery came in the later part of the month which followed key developments oaf (1) commitment by Saudi Arabia to provide a support package of US$4.2bn to Pakistan – US$3bn to be deposited in State Bank and the rest US$1.2bn to be used to finance oil derivatives throughout the year and (2) anticipation of reaching conclusions with IMF post IMF’s allowance to utilize the US$2.78bn COVID-19 related fund for meeting budgetary requirements.

Retracement in global coal prices supported outperformance of the Cement sector while increase in government paper yields amid expected increase in Policy Rate also included the Banking sector among top gainers. Recovering profitability reported during the corporate result season also kept the Engineering and Fertilizer sectors among key gainers during Oct-2021.

Depreciating PKR and rising raw material costs continued adding to the Auto sector’s underperformance, while the new global minimum tax of 15% kept investors shy from the Technology sector this month.

During the month, Foreign Investors remained net sellers mainly in the Banking sector, largely absorbed by the Insurance and Companies investor segments.

We reiterate the KSE100 Index trades at attractive multiples of forward PE of 5.5x, 32% discount to its 10yr mean and dividend yield of 7%, reflecting substantial upside; where resumption of IMF program stands as a key trigger.