Pakistan Stock Market: October Review and Outlook

KSEAccording to an AKD Research report bullish momentum continued in October with the KSE-100 Index rising by 2.2% to close at 30,377 points. Pakistan market gained attraction due to reduction in political noise, positive developments on the macro front (CSF receipts and higher remittances) and sustained corporate profitability. These developments ostensibly led to increased confidence on the local front, with domestic buying able to counter net FPI outflow of US$31 million during the month under review. Going forward, analysts believe the consistent bottom-up theme should continue with renewed rerating. While risks remain, this should take Pakistan market to higher levels.

Key news flow include: 1) CSF receipts of US$371 million, 2) commencement of IMF talks for 4th and 5th reviews clubbed together, 3) a 9.7%MoM decline in international oil prices, 4) Supreme Court approval for OGDC’s stake sale and 5) a 20%YoY increase in 1QFY15 remittances, enabled the PkR/US$ parity to remain stable and raise confidence on macro outlook.

Within the mainboard sectors, key performers included Autos (up 17.4%MoM on a weaker JPY and launch of new variants), Electricity, Pharmaceuticals, Food Producers and Cements on strong domestic offtake. On the flipside, Oil & Gas shed 6.9%MoM on the back of lower international oil prices and Telecoms dropped by 11.3%MoM largely due to PTC’s surprise consolidated loss in 3QCY14.

The KSE-100 Index gained 2.2% in October, taking CYTD/FYTD returns to 20.2% and 2.4% respectively. Considering lower oil prices will prove beneficial for the economy and that political noise appears to have tapered off, analysts expect the macro rerating theme to once again get support from strong underlying corporate profitability to take the Pakistan market to record highs.


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