The bullish momentum continues on the back of accelerated
pace of monetary easing by State Bank of Pakistan (SBP) and IMF’s visit with a
focus on structural reforms.
During the visit, the IMF mission held discussions with
local authorities, focusing on the external financing gap and the Federal Board
of Revenue (FBR) revenue collections. FBR officials assured the IMF that the
revenue target would remain unchanged, attributing the shortfall in revenue
collection during the first four months of FY25 to inaccurate economic assumptions,
particularly regarding GDP growth, imports, and inflation.
Both the sides discussed short-term as well as long-term
measures to address the potential revenue shortfall, including raising taxes on
sugary drinks and the import of machinery and raw materials.
In the latest T-Bills auctions, the SBP raised PKR776
billion, with bulk of the participation confined to 3-month tenor. The yield on
the 3-month bill decreased by 20bps, while the yield on the 12-month bill
increased by 10bps.
Auto sector sales for October 2024 was reported at 15,192
units, up 31%YoY.
Foreign exchange reserves held by SBP increased by US$84
million WoW, ending the week at US$11.2 billion as of November 08, 2024.
Average daily traded volume rose by 19.6%WoW to 878.5 million
shares, from 734.6 million shares traded a week ago.
PKR largely remained stable against the greenback throughout
the week.
Other major news flow during the week included: 1) Gop
awaits IMF stance on mini-budget, 2) Solarization plunging power demand upsets
IMF, 3) APM Terminals commits to invest in Pakistan, 4) Finance Minister
invites Turkish firms for JVs and 5) Russia expresses interest in working with
Pakistan on North-South Trade Corridor (NSTC).
Transport, Woollen, Pharmaceuticals, Vanaspati & Allied industries
and Glass & Ceramics were amongst the top performing sectors, while Jute,
Mutual Funds, Automobile Assembler, Fertilizer & Engineering were the
laggards.
Major net selling was recorded by Companies with a net sell
of US$11.0 million, while Mutual Funds absorbed most of the selling with a net
buy of US$13.9 million.
Top performing scrips of the week were: Searl, EFUG, BNWN, TRG,
and ABOT, while laggards included: FCEPL, THALL, MLCF, MUGHAL, and KOSM.
Continuation of monetary easing and improving macroeconomic
environment would make investment in equities more appealing, currently trading
at P/E of 4.2x and DY of 10.8%.
Aforementioned factors, along with declining external financing
requirement under the IMF program, would keep foreigners’ interest alive. We
recommend sectors that benefit from monetary easing and structural reforms.
However, modest economic recovery may limit the upside for
cyclicals. Top picks of AKD Securities include, OGDC, PPL, MCB, MEBL, FFC, PSO,
LUCK, MLCF, FCCL and INDU.
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