Overall positive sentiments were largely driven by improved
liquidity in equity market, as local funds continued to shift flows from fixed-income
assets due to declining interest rates.
Investors’ optimism was further bolstered by the visit of a
Saudi delegation, which resulted in the signing of 27MoU’s worth US$2.2 billion,
and discussions surrounding the Reko-Diq stake sell.
The GoP finally terminated Power Purchase Agreements (PPA)
with five Independent Power Producers (IPPs) during the week, with discussions
regarding 17 more IPPs lined up for future negotiations to shift from
Take-or-pay model to Take-and-pay.
On the macroeconomic front, workers' remittances inflow
remained robust in September 2024, totaling US$2.85 billion or 29%YoY increase.
While the trade deficit for the month was reported at
US$1.78 billion, current account is expected to remain stable, with a potential
surplus for the period.
Moreover, in efforts to address the tax gap from the 1QFY25
deficit, GoP communicated likely tax hikes to the IMF, particularly on direct
imports (mainly machinery) and advanced import taxes.
Furthermore, a tax on agriculture is expected to be
implemented from July 2025, according to the Finance Minister.
Amid the positive momentum, market participation also surged
by 51.3%WoW, with average daily traded volume rising to 518 million shares,
from 342 million shares in the earlier week.
Foreign exchange reserves held by SBP increased by US$106 million
WoW to US$10.8 billion as of October 04, 2024, a 2.5-year high.
Other major news flows during the week included: 1) Public
debt in August 2024 surged to PKR70.4 trillion, 2) Task force to discuss
mechanism for 35% gas sale to private firms, 3) Rebasing of electricity tariffs
likely from January 01, 2025, and 4) Car sales surged by 24%YoY in September
2024.
Transport, Modarabas, and Woollen were amongst the top
performing sectors while the laggards included: Power Generation &
Distribution, Vanaspati & Allied industries, and Paper & board.
Major selling was recorded by Foreigners with a net sell of
US$18.9 million. Mutual Funds absorbed most of the selling with a net buy of
US$22.6 million
Top performing scrips of the week were: PTC, PSO, ATLH, LCI,
and PPL, while top laggards included: HUBC, KOSM, NCPL, YOUW, and LUCK.
Going forward, the market is expected to remain positive,
supported by declining interest rates, likely to continue driving flows towards
equity market.
Despite recent highs, market remains attractive, trading at
P/E of 3.7x and a dividend yield of 12.7%.
Pakistan’s leading brokerage house, AKD Securities recommend
focusing on sectors that stand to benefit from monetary easing and structural
reforms, particularly high-dividend-yielding stocks, which are expected to
rerate as yields align with fixed-income instruments. Top picks include: OGDC,
PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.
