Stock Review - Markets jump back; FATF, monetary policy outcome likely to guide.

Byline: Shabbir Kazmi

After four consecutive sessions of retreat, the benchmark index of Pakistan Stock Exchange (PSX) staged a rebound on the last trading day of the week ended on 24th January 2020, closing at 42,633 points, but still down by 1.24%WoW. The market remained under pressure on fears of: 1) inflation likely crossing 13% mark in January 2020 putting on hold expectations of interest rate cut in forthcoming Monetary Policy announcement and 2) potential gas price hikes where the decision to reduce GIDC to Rs5/bag from Rs405/bag added to the uncertainty particularly in the Fertilizer sector. Average daily trading volumes declined to 186.7 million shares, down 20.2%WoW due to lack of triggers as well as awaiting the outcome of FATF joint group meeting in Beijing.

Other news flows impacting the market included: 1) current account deficit narrowed 75%YoY to US$2.15 billion during first half of the current financial year, 2) foreign investment in treasury bills touched record US$2.2 billion and 3) Half-yearly uplift spendng rose to 55% of allocation.

Foreigner emerged net buyers with US$2.8 million, which together with banks with net buy of US$2.3 million absorbed profit-taking by Individuals of US$2.2 million and Insurance net sell US$2.8 million. Sector wise, Cable and Electrical Goods and OMCs witnessed major declines where the latter came under pressure due to below expected result of APL on inventory losses. This was followed by Fertilizers, Engineering and Autos. Top performers of the week were: NML, CHCC, FFC, PIOC and FFBL, while laggards were: HASCOL, APL, HMB, EFERT and ENGRO.

The market performance in the upcoming week is likely to be governed by positive outcome of Pakistan and FATF joint group meeting where Pakistan's efforts have been widely acknowledged and Monetary Policy announcement scheduled on 28th January 2020. Pressure would also be exacerbated by portfolio realignment as a result of roll-over week.

Bank AL Habib (BAHL) is scheduled to announce its full CY19 results on 29th January 2020. Analysts expect the Bank to announce profit after tax of Rs11.1 billion, up 31.1%YoY from Rs8.4 billion for CY18. The result is also likely to be accompanied by a dividend of Rs3.5/share. Confluence of likely robust growth in deposits of more than 15% as against an industry average of 9.6%; addition of branches and interest rate hikes could push NII growth to 38.7% for CY19.

This coupled with stable contribution from NFI (15.2% of...