Finance

Package supports market from blood bath Market Commentary

Karachi, March 28, 2020: During the four day trading week (Monday being a National Holiday to mark the Pakistan Resolution Day), the index closed in red in 2/4 sessions. Stocks dived sharply to 27,229 points in the first two days, lowest level since Mar’14, as investors continued to gauge the broader economic fallout of Coronavirus.

Albeit, the SBP slashed its benchmark rate by 150bps to 11 percent, PM Khan and his Cabinet devised a reassuring PKR 1.2 trillion relief package, and as details emerged of new measures adopted by SBP and PBA giving relief to borrowers and on markup, the bourse snapped up. The KSE-100 closed at 28,110 points (down by 8 percent / 2557 points WoW).

Sector-wise negative contributions came from i) Commercial Banks (878 points), ii) Oil & Gas Exploration Companies (344 points) and iii) Fertilizers (316 points). Scrip-wise negative contributions were led by HBL (314 points), ENGRO (182 points), and OGDC (146 points).  While positive contributions were led by POL and ATLH at 5 points each.

Foreign selling continued this week clocking-in at USD 13.7 million compared to a net sell of USD 19.6 million last week. Selling was witnessed in Commercial Banks (USD 5.3 million) and E&P (USD 3.5 million). On the domestic front, major buying was reported by Individuals (USD 6.2 million) and Insurance Companies (USD 5.0 million). Average Volumes settled at 239 million shares (down by 8 percent WoW) while average value traded clocked-in at USD 55 million (up by 41 percent WoW).

Other major news: i) Massive dip in POL products use after lockdown, ii) Companies shut plants amid lockdowns, iii) FFC reduces Sona urea price after GIDC waiver, iv) ECC approves tariff hike of up to Rs2.89 for K-Electric, and v) SBP unveils debt relief measures for individuals, businesses.

Outlook and Recommendation

Although current levels at the index appear enticing, we believe a sustainable rally in the medium term will remain subject to release of an expiry date for the corona pandemic. Until then, the market may continue to depict a jittery trend.

With that said, the investors has been advised to invest in long-term blue chip stocks with deep pockets to endure the aftereffects of the ongoing lockdown; our preferred stocks are HBL, UBL, MCB, OGDC, ENGRO, LUCK, ACPL, and FFC. The KSE-100 index is currently trading at a PER of 5.2x (2020) compared to Asia Pac regional average of 10.2x and while offering DY of ~9.9 percent versus ~3.1 percent offered by the region.

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