Zubair Yaqoob
Karachi
The market commenced on a negative note with FATF warning to Pakistan echoing from last Friday. The negativity was cushioned as Pakistan steeply climbed the World Bank Ease of Doing Business Index from 136th to 108th. Further inversion in T Bill yields continued to improve sentiment. However, duress on the political front amid opposition preparing for a protest against the government dampened sentiment towards end of the week.
The KSE-100 Index closed at 33,657 points, shedding 213 points (down by 0.6%) WoW. Sector-wise negative contributions came from Commercial Banks (108pts), Cement (104pts), and Power Generation & Distribution (76pts) while positive contributions were led by Oil & Gas Exploration Companies (118pts), Food & Personal Care Products (47pts) and Fertilizer (30pts).
Scrip-wise negative contributions were led by LUCK (58pts), BAHL (44pts), HUBC (42pts), PSEL (35pts) and HBL (35pts). Foreign buying was witnessed this week clocking-in at USD 2.8mn compared to a net sell of USD 2.1mn last week. Buying was witnessed in Cement (USD 2.0mn) and Fertilizer (USD 1.2mn).
On the domestic front, major selling was reported by Individuals (USD 3.1mn) and Companies (USD 2.2mn). Average Volumes settled at 125mn shares (down by 11% WoW) while average value traded clocked-in at USD 25mn (down by 17% WoW). Other major news: KE awards $650m contract to Siemens, Harbin Electric, Steel industry demands ban on import via land route, Tax amnesty drives healthy growth in bank deposits, Car import falls 83 percent to $14.7mln in first quarter and Forex reserves rise to $15.186bln. Analysts expect the market to remain range-bound amid political uncertainty with JUI-F to hold “Azadi March” on 27th Oct’19.
On the economic front, narrowing current account deficit and improving foreign reserves serves as a good omen for overall confidence in the market. With the result season continuing next week, the analysts expect activity to be influenced accordingly. The KSE-100 index is currently trading at a PER of 5.8x (2020) compared to Asia Pac regional average of 13.3x and while offering DY of ~9.4% versus ~2.4% offered by the region.
