AKD Securities Limited Equity Research – Daily Report (02-12-2019)

Karachi, December 02, 2019 (PPI-OT): Pakistan Market: Gearing up for a closing in the green

Buoyant participation (KSE-100/All Vol. up 48.5/56.7%MoM) with inflows from domestic individual participants (inflow of US$40.7mn) led the KSE-100/All to post 14.9/12.7%MoM returns for the outgoing month, exceedingly strong returns, the likes of which were last seen in May’13.

Underlying sectoral performance shows broad-based returns, with mainboard sectors (Cements/OMCs up 21.4/17.3%MoM) supported by side-board cyclical plays (Autos/Cable and electrical up 36.1/29.9%MoM) pushing the index higher, and confirming a stable macro outlook, conducive GoP policies (circular debt resolution) and peak tightening (with CPI a key roadblock to loosening).

FIPI inflows of US$8.84mn added to take CYTD/FYTD inflows to US$67.0/19.3mn, with Fertilizers/Banks/OMCs attracting the brunt increased participation (US$16.1/14.1/5.5mn inflows), while individuals remained in the driving seat posting net buy of US$40.7mn followed by mutual funds turning buyers during the month (US$21.1mn net buy during the month, while FYTD outflows now at US$65.7mn).

With macro targets on track and political noise subsiding, end of period window dressing coupled with portfolio re-balancing (in light of expected monetary easing) should keep market momentum optimistic. Over the longer run we favor leveraged plays (on expectation of monetary easing), IPPS and PSO (power sukuk issuance) and E and Ps (cheaper valuation/privatization driven flows).

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