AKD Securities Limited – Stock Smart

Karachi,
February 08, 2019 (PPI-OT): Weekly Review

Building
on last 5-week momentum, the market started the week on a positive note, with
KSE-100 index gaining 502pts on the first trading session, as the market
participants eulogized announcement of potential financial assistance of
US$2.5bn from China. However, the index pared earlier gains in the following three
sessions as lack of concrete developments on the IMF bailout shattered the
investors’ confidence, with KSE-100 index losing 0.55%WoW to close the week at
40,887pts (down 226pts). Sector-wise, cement scrips remained in the limelight
where sector initially gained on softening coal prices while paring back some
of the earlier gains on disappointing Jan’19 offtakes.

Trading
activity slightly picked up (9.5%WoW to average daily turnover of 191.5mn
shares), with concentration away from the main board. Key news flows impacting
the market during the week included i) Gov’t officials reportedly hinting
towards another financing support of US$2.5bn from China, aimed at boosting FX
reserves, ii) international credit rating agency Standard and Poor’s
downgrading Pakistan’s long-term credit rating to ‘B-Negative’ from ‘B’, citing
fragile external position and weak growth outlook, iii) Pakistan and Russia
inking an inter-corporate agreement for the laying of more than 1,500 km
offshore gas pipeline costing US$10bn, iv) total cement dispatches declining by
10.7%YoY to 3.6mn ton in Jan’18, with a more pronounced decline in local
offtake (down 18%YoY), and v) Country’s FX reserves marginally moving up
0.56%WoW (+US$83mn) to US$14.88bn during the week ended Feb 01’19, with reserves
held by the central bank rising to US$8.19bn (+38mn). Key performers over the
week were: i) FCCL (+6.89%WoW), ii) DGKC (+6.58%WoW), iii) CHCC (+5.28%WoW),
iv) MLCF (+5.12%WoW) and v) INDU (+4.44%WoW), while laggards included: i)
HASCAL (-4.75%WoW), ii) HBL (-3.39%WoW), iii) PSO (-3.09%WoW), iv) UBL
(-2.92%WoW) and v) EFOODS (-2.07%WoW).

Outlook

Broader
market performance is likely to remain range-bound until clarity emerges on the
potential IMF program. However, upcoming Saudi Crown Prince’s visit to
Pakistan, with the likely announcement of multibillion-dollar investment deals
could trigger a short-lived euphoric rally. Of more importance is the continued
foreigners buying interest in setting market direction, in our view, where
continuation of the same could keep the market upbeat.

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