Islamabad, February 01, 2024 : Pakistan Stock Exchange performance from January 2024, KSE-100 down by 0.8% MoM.
Foreign selling clocked in at USD 37mn:
The market remained range-bound, with the index hovering around 62k level in Jan’24. The month commenced on a positive note with “January effect” kicking-in, which is primarily owed to the approval and disbursement of USD 700mn post completion of first review of Stand-By Arrangement (SBA) by the IMF. Whereas, UAE rolled over USD 2bn for one more year.
Moreover, the reports of the Govt. planning to release PKR 1,250bn to energy chain to reduce circular debt further fuelled the rally at the index. However, the momentum could not sustain given the uncertainty of the plan. Furthermore, political uncertainty and western border tension briefly contributed to the negative at the index. Additionally, the MPC decided to keep the policy rate unchanged at 22%. The SBP’s reserves increased from USD 8.2bn in Dec’23 to USD 8.3bn by Jan’24 end. Hence, PKR closed at 279.50 against USD, strengthen by PKR 2.36 | 0.84% MoM. Albeit, the market closed at 61,979 points, tumbling by 472 points | -0.79% MoM.
Major News:
Petroleum sales fall 7pc in December on higher prices and lower demand, Urea offtake in December fell 25 percent year-on-year, Jul-Dec power sector circular debt soars to Rs2.55trn, RDA accounts attract $7.2bn from overseas Pakistanis, Car sales decline 55% YoY in 1HFY24, weak demand, Rs306bn authorised for PSDP projects, OGDCL announces oil discovery at Sono-9 well in Hyderabad, Ogra grants licence to SSGC’s subsidiary, Merit Packaging plans selling assets of Rs 1.55bn to related party lender, PTCL, Huawei complete 50G-PON trial, PSX to auction Rs400bn Islamic Bonds in 1Q2024, Govt grants first electric rickshaw license to Sazgar, PM says govt, Islamic banking assets grow 22 percent in Q3, TOMCL became the first company from South Asia to successfully export cooked/heat-treated frozen beef to China, Refiners cry foul as govt seeks fresh legal advice on upgrade policy, HSD cargoes’ import: PSO granted exclusive rights, and Shanghai Electric extends deadline for K-Electric deal by 90 days.
Outlook and Recommendations:
The General Elections 2024 are expected to be held on 8th Feb’24, and transition of power to the newly elected Government is expected to increase investor confidence in the market. Historically, the KSE 100 has climbed up by 6% after one month of general elections, which is based on average of last four elections. With the ongoing result season, certain scrips are expected to remain in the limelight on the expectation of robust results.
We expect the inflation to come down during the month of Feb’24 due to a high base effect. However, it is essential to acknowledge certain risk factors that could impact these projections, including: i) volatility in food and energy prices, ii) the possibility of another gas tariff adjustment in Feb’24, albeit of a reduced magnitude, and iii) the potential depreciation of the PKR against the USD.
The KSE-100 is currently trading at a PER of 4.2x (2024) as compared to its 5-year average of 5.9x offering a dividend yield of ~10.8% as compared to its 5-year average of ~6.0%. Our preferred stocks are OGDC, MARI, MCB, UBL, MEBL, FABL, HBL LUCK, MLCF, FCCL, FFC, HUBC, PSO and INDU.
