AKD Securities Limited Equity Research – Daily Report

Karachi, March 14, 2019 (PPI-OT): Pakistan Strategy: De-mystifying low volumes

Heightened trading activity in the run-up to, and during results season have historically been a foundation of 3QFY volumes, highlighted by KSE-100 average volumes over 3QFY10-18 rising 23.7%QoQ, while the average concentration of 3QFY volumes as % of total FY volumes rests at 27% during the last nine years, indicating seasonal attraction in markets during a period of heavy event/earnings developments.

With only 11 trading days left in 3QFY19 (KSE-100/All average of 88.45/138.07mn shares), we look at the reasons behind -21.1/-24.8%QoQ decline in average KSE-100/KSE All volumes, highlighting the shallowness of markets as being motivated by lack of cohesive policy direction, relative attractiveness of other asset classes (fixed income), and idiosyncratic developments surrounding specific industrial segments.

KSE-100 index has cumulatively de-rated by ~12% in the past one year (exc. dividends) to trade at a CY19F P/E of 8.2x, while flows have witnessed a flight to blue-chip plays, with average volumes for KSE100 as a proportion of KSE-All volumes for 3QFY19TD at 64.1% vs. 3QFY11-18 average of 59.7%.

With widening appeal for re-rating, particularly in heavy-weight sectors (Banks and E and P, on ~11%QoQ earnings growth for 2QFY18) we re-iterate our CY19 Strategy stance, advocating for investors to build positions factoring-in a long term horizon, where any correction should be taken as an opportunity to accumulate.

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AKD Securities Limited Equity Research – Daily Report

Karachi, March 14, 2019 (PPI-OT): Pakistan Strategy: De-mystifying low volumes

Heightened trading activity in the run-up to, and during results season have historically been a foundation of 3QFY volumes, highlighted by KSE-100 average volumes over 3QFY10-18 rising 23.7%QoQ, while the average concentration of 3QFY volumes as % of total FY volumes rests at 27% during the last nine years, indicating seasonal attraction in markets during a period of heavy event/earnings developments.

With only 11 trading days left in 3QFY19 (KSE-100/All average of 88.45/138.07mn shares), we look at the reasons behind -21.1/-24.8%QoQ decline in average KSE-100/KSE All volumes, highlighting the shallowness of markets as being motivated by lack of cohesive policy direction, relative attractiveness of other asset classes (fixed income), and idiosyncratic developments surrounding specific industrial segments.

KSE-100 index has cumulatively de-rated by ~12% in the past one year (exc. dividends) to trade at a CY19F P/E of 8.2x, while flows have witnessed a flight to blue-chip plays, with average volumes for KSE100 as a proportion of KSE-All volumes for 3QFY19TD at 64.1% vs. 3QFY11-18 average of 59.7%.

With widening appeal for re-rating, particularly in heavy-weight sectors (Banks and E and P, on ~11%QoQ earnings growth for 2QFY18) we re-iterate our CY19 Strategy stance, advocating for investors to build positions factoring-in a long term horizon, where any correction should be taken as an opportunity to accumulate.

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