KSE-100 Index started new year with renewed optimism

Karachi, january 9, 2020: The KSE-100 Index started the new year with renewed optimism, led by a bullish spree in IPP scrips, following the announcement of the plan for circular debt resolution. Moreover, oil prices saw a jump of 7.8 percentWoW, as reports came in of Russia abstaining from pushing for an output hike in February.

 Expectations of a textile policy announcement plus circular debt resolution plan (benefit for holding companies) created optimism in textile scrips as well. Banking scrips (large banks in particular) attracted interest as well given economic recovery in the country appears to be on track and loan growth outlook has improved considerably. The domestic equity bourse closed at 45,654 points (+1,220 points WoW).

Sector-wise positive contributions came from i) Banks (561pts), ii) Fertilizers (224pts), iii) Oil & Gas Exploration (153pts), iv) Power Generation & Distribution declined (66pts), and v) Chemicals (47pts). Scrip-wise positive contributions were led by i) UBL (154pts), ii) HBL (117pts), iii) MEBL (90pts), iv) DAWH (88pts), and v) MCB (80pts).

Foreign buying this week clocking-in at USD 3.4 million compared to a net sell of USD 46.22 million last week. Buying was witnessed in Commercial Banks (USD 3.64 million) and Technology (USD 2.0 million).

On the domestic front, major selling was reported by Insurance Companies (USD 8.1 million and Banks / DFIs (USD 8.1 million). Average volumes arrived at 625 million shares (up by 18 percentWoW) while average value traded settled at USD 153 million (up by 8 percentWoW). 

Other major news: i) Trade deficit widens by 32.04pc to $2.683 billion in Dec, ii) ECC okays additional wheat import for buffer stock, iii) SBP says growth outcome hinges on response to Covid, and iv) Cement sector posts 11.18pc growth in Dec.

Outlook and Recommendation

We expect the bull-run in the market to continue. Developments on the vaccine front and its gradual roll-out across the world is likely to keep interest in equities afloat.

Expectations of healthy corporate profitability during the outgoing quarter particularly across cyclical sectors should keep sentiment positive.  The KSE-100 index is currently trading at a PER of 7.7x (2021) compared to Asia Pac regional average of 18.0x and while offering DY of ~6.0 percentversus ~2.5 percentoffered by the region.

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