Karachi, June 25, 2021 (PPI-OT): Weekly Review
KSE-100 remained range bound during the outgoing week as investors remained jittery regarding the FATF Plenary meeting which took place from 21st Jun’21 to 25th Jun’21 while uneasiness regarding ongoing talks with IMF continues to play on investors’ mind. KSE-100 closed the week at 47,603pts, down 1.3%WoW. Automobile Assemblers turned out to be among the outperformers, increasing by 0.28%WoW, led by PSMC as the stock rallied in anticipation of tax incentives offered to cars under 850cc being extended to cars under 1000cc as well. Cable and Electrical Goods also stood among the outperformers, increasing by 1.19%WoW as ongoing summer season is expected to uplift sales of the sector. Food and Personal Care products sector increased by 3.07%WoW as government took back the proposal to increase GST on dairy products.
On other hand, Cement sector declined by 3.56%WoW as coal prices continue to increase, mounting pressure over margins. Major newsflow during the week included i) Prime Minister Imran Khan categorically stating that Pakistan would ‘absolutely not’ allow any bases and use of its territory for any sort of action inside Afghanistan, ii) Saudi Arabia agreeing to restart oil aid to Pakistan worth at least US$1.5bn annually in July, iii) Pakistan’s trade deficit during the first 11 months (July-May) of the current fiscal year 2020-21 reaching US$27.463bn as compared to US$21.065bn for 11MFY20, iv) Sui Southern Gas Company (SSGC) announcing that gas supply to non-export industries has been stopped, followed by 50% cut in supply to captive power plants, and v) Finance Minister Tarin saying that IMF has shown flexibility on demands.
Average daily traded volume wise leaders included i) SILK (415.73mn shares), ii) WTL (387.96mn shares), iii) BYCO (153.07mn shares), iv) HUMNL (137.21mn shares), and v) TPL (130.44mn shares). Flow wise, individuals remained the major buyers with a net buy of USD13.7mn followed by Banks/DFI (net buy +USD12.9mn) while insurance stood on the other side with a net sell of USD12.8mn followed by mutual funds (net sell of USD7.35mn).
Outlook
Ongoing discussions with IMF regarding continuation of program and approval of Budget FY22 will continue to create noise for the market while FATF maintaining Pakistan on grey list will not have any significant bearing on the performance, in our view. Budget FY22 still remains to be passed from parliament and news items regarding Budget will continue to affect sector specific performance. Moreover, focus will also shift towards upcoming result season where we expect margin suppression for cyclical plays on the back of increased raw material costs however surprises could arise from players maintaining large (i.e. low cost) inventory.