PSX benchmark index up 7.6%WoW

Pakistan Stock Exchange (PSX) continued its bullish momentum throughout the week, leading to a major increase in the benchmark index, registering its highest ever weekly point gains of 7,697 and market closed at a record high of 109,054 points, up 7.6%WoW on Friday, December 06, 2024.

The bullish momentum was fueled by November 2024 inflation recorded at 4.9%YoY, lowest in nearly six and half years, fueling expectations for continued monetary easing in the upcoming Monetary Policy Committee scheduled for December 16, 2024.

Major contributing sectors to this rally were commercial banks, followed by Fertilizer, and Oil & Gas Exploration. Interest in the banking sector continued to rise, with gross advances increasing by 21%YoY as of November 15, 2024, taking the ADR to 46.9%, with expectations of crossing the 50% threshold before the year-end to avoid ADR-based taxation.

Meanwhile, fertilizer sector advanced on ENGRO’s agreement to acquire the Jazz Tower business, coupled with the Lahore High Court’s approval of the FFC-FFBL merger.

Saudi Fund extends term of US$3 billion deposits for another year.

Trade deficit for November 2024 was reported at US$1.6 billion, down 19%YoY.

Total debt dropped by 1%MoM to PKR69 trillion in October 2024.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$620 million, following a US$500 million loan disbursement from the Asian Development Bank (ADB), taking total reserves held by SBP to US$12.0 billion as of November 29, 2024.

Market participation increased by 21.5%WoW to 1.7 billion shares, as compared to 1.4 billion shares traded in the earlier week.

PKR remained stable against the greenback, closing the week at PKR278.01 to a US$.

Other major news flow during the week included: 1) Saudi crown prince accepted invitation to visit Pakistan, 2) Oil sales surged to 25-month high, 3) Cement dispatches increased 5.58%YoY, 4) FBR decided to put more curbs on FATA/PATA steel sector and 5) Prime Minister hinted towards cut in policy rate.

Vanaspati & Allied Products, Transport, Refinery, Cable & Electrical goods and Engineering were amongst the top performing sectors.

Major selling was recorded by Individuals, Insurance companies, and foreigners with a net sell of US$26.0 million, US$21.0 million, and US$14.2 million, respectively. Mutual funds and companies absorbed most of the selling with a net buy of US$44.0 million and US$10.7 million, respectively.

Top performing scrips of the week were: CNERGY, Airlink, PABC, NML, and PAEL, while laggards included: EFUG, JVDC, HBL, AKBL, and PSEL.

Continuation of monetary easing due to disinflationary environment and improving macroeconomic environment would make investment in equities more appealing, currently trading at P/E of 5.0x and DY of 10.2%.

Moving forward, upcoming MPC meeting would remain in investor’s focus, also keeping cyclical sector attractive.

Aforementioned factors, along with declining external financing requirement under the IMF program, would keep foreigners’ interest alive.

Top picks of AKD Securities include: OGDC, PPL, MCB, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

 

 

Pakistan stock market declines by 1.6 percent in Feburary

As the global markets remained volatile, Pakistan could not remain immune. During February 2016 the benchmark PSE-100 index slide marginally and closed at 31,370 points, down by 1.60%MoM.
While upward movement in oil prices (Brent up 5.6%MoM) restricted losses to some extent, continued foreign selling (net outflow of US$39.5 million), lackluster results announcements and adverse news flows (regulatory action, legal challenges) propelled bearish pressures.
Most of the sectors were on the downward spree except commercial banks, posting decent earnings announcements, up 2.9%MoM. All other sector posted decline that included Automobiles (down 8.3% on strengthening Yen), Fixed Line Telecommunication (down 5.7% on disappointing CY15 earnings) and Food Producers (down 5% on expected slowdown in earnings growth).
An AKD Research Report hints market sentiments during March 2016 will be driven by: 1) uncertainty on the political front particularly due to the actions being taken by law enforcing agencies against the brokers’ fraternity, 2) foreign selling and 3) Monetary Policy announcement within the month. Expectations are building that with declining PIB yields (down 60bps in the recent auction) and lower than expected inflation number, reduction in discount rate can’t be ruled out.
Taking charge after a very long time, the index heavy-weight, banking sector led the rally during the month under review. The outperformance was a function of above expected earnings announcements and year-end payouts.
Cements, on the other hand, remained on the sidelines, despite positive earnings surprises by players such as MLCF, DGKC and FCCL.
Strengthening of Yen against PkR (down 6.7%during the month) reversed gains for Automobile (down 8.3%MoM) making it one of the worst performing sectors.
With an outflow of US$39.5 million during the month under review foreigners continued to trim their equity positions taking FYTD net outflow to more than US$330 million. This marks the eighth consecutive month in which there has been a net outflow of portfolio capital with selling largely being a function of the global portfolio re-alignment strategy.
While foreign flows will continue to play a major role in determining market direction/participation going forward, analysts believe the Monetary Policy announcement due this month is of importance where a few market participants (particularly some banks) are now eyeing a rate cut.
Any surprise, in this regard should bring renewed interest in cyclical and yield plays. Apart from this, clarity on the regulatory front particularly with regards to implementation of reforms (Amendments to SECP bill, Licensing of operations regulations for NBFCs, Mutual Funds amongst others) would go far in renewing foreign investor participation. Trinkets of news flows surrounding the run-up to the budget FY17 are likely to drive performance accordingly.