In Wednesday’s T-Bills auction, cut-off yields witnessed a
significant decline, which brought the 3-month yield down to 17.49%, indicating
market expectations of a rate cut exceeding 100bps in the upcoming Monetary Policy
Committee (MPC) meeting scheduled for September 12, 2024. These expectations of
rate cut led to the rerating of high dividend yielding stocks, notably FFC and
UBL.
Additionally, NBP stood third in terms of index points
contribution, driven by expectations of lower-than-expected provisioning
related to pension case in its upcoming financial results.
Pharmaceutical sector also performed well, buoyed by better
than anticipated financial results by the players, supported by the
deregulation of non-essential drugs.
On the macro front, the anticipated timeline for IMF
Executive Board approval was pushed to September from the previous August due
to unmet debt rollover requirements.
The Finance Minister remains optimistic about securing Board’s approval by next month. The current account remains in control, reporting deficit of mere US$162 million for July 24, big thanks to remittances.
PKR largely remained stable, closing the week at PKR278.50/US$.
Major news flows during the week included: 1) July FDI inflow
in July was up 64%YoY to US$136.3 million, 2) LSM sector in FY24 grew 0.92%YoY,
3) RDA attracted US$161 million in first month of the current financial year,
and 4) Banking sector deposits increased 19% to PKR30.6 trillion in July 2024.
Woollen, Jute, and Leather and Tanneries were amongst the
top performing sectors, while Tobacco, Automobile assembler, and Textile
weaving were amongst the worst performers.
Major net selling was recorded by Insurance companies with a
net sell of US$6.3 million. Mutual, Banks and Companies absorbed most of the
selling.
Top performing scrips of the week were: NBP, PGLC, SRVI,
HINOON, and BNWM, while top laggards included: YOUW, CEPB, SML, ISL, KTML.
Looking ahead, market is expected to continue its positive
momentum due to August 2024 lower inflation reading, upcoming MPC outcome and
positive development on the IMF negotiations.
AKD Securities opines that sectors benefiting from monetary
easing and structural reforms would remain in the limelight. Additionally, with
declining fixed income yields, high dividend-yielding stocks are expected to
remain in focus.
