Overall, the bullish sentiment was predominantly driven by
high-dividend-yielding sectors including Banks, E&P, and Fertilizers, as
falling fixed-income yields led to a rerating of these sectors.
Current account balance for August 2024 posted a surplus of
US$75 million, largely underpinned by a 40%YoY increase in remittances.
Additionally, exports also remained higher during the month, with growth
largely supported by an annual increase of 13% in Textile and 40% in Food
exports.
Subsequently, LSMI activity also rose by 2.4%YoY in July
2924, with Textiles and Food driving output expansion.
The GoP reduced POL prices for the fourth consecutive time,
lowering these by over PKR80/liter compared to same period last year. This
consistent decline in POL prices is expected to further alleviate inflationary
pressures.
The rejection of all bids in recent T-Bills auction and the
less-than-target acceptance in the PIB auction, along with declining yields,
would potentially shift liquidity toward equities.
On the international front, the US Federal Reserve cut
interest rates after four years by 50bps.
Market participation declined by 22.6%WoW, with the average
daily traded volume dropping to 469 million shares from 607 million shares in
the earlier week.
On the currency front, PKR largely remained stable against
the greenback, closing the week at 277.8/US$.
Other major news flows during the week included: 1) ADB
assures Pakistan US$2 billion annually in loans, 2) FDI rises to US$350 million
in first two months of the current financial year, 3) Power demand slumps
17%YoY in August, and 4) In PIBs auction PKR111 billion was raised against
PKR200 billion target.
Top performing sectors were Pharmaceuticals, Commercial
Banks, and Fertilizer, while Woollen, Cable & Electrical Goods, and
Engineering were amongst the laggards.
Major net selling was recorded by Foreigners with a net sell
of US$23.2 million. Mutual Funds absorbed most of the selling with a net buy of
US$15.5 million.
Top performing scrips of the week were: MARI, SHFA, HBL,
MEBL, and MCB, while laggards included: SML, YOUW, WFUG, TGL, and PIBTL.
IMF Executive Board’s approval, along with continued
monetary easing would keep equities in focus, with the market trading at an
attractive P/E of 3.7x and a DY of 13.2%. The completion of the FTSE
rebalancing would further boost investor confidence.
AKD Securities recommends sectors benefiting from monetary
easing and structural reforms, particularly high-dividend-yielding stocks,
which are expected to relate as yields align with fixed-income returns.