July Review

After a whopping 8pc decline in June, the market fell 1.2pc(555pts) in July to 46010, after recovering from a low of 43027. Average turnover fell 32pc  to 175mln shares while value traded tumbled 25pc to Rs.9.6bln.

Politics moved center stage during the month, with the JIT summoning PM and his family. As the proceedings moved palpably against the ruling family, the market took a hit, touching 43027 intra day on Jul 12 and closing at 43207. Thereafter the market sought some semblance of political direction and sensing reduction in political speculation, after the SC verdict on Jul 28, it pulled back to 46000. At the end of July the KSE100 is down 1800pts(3.75pc) for the year.

During the course of the month, turnovers took a beating with volumes skewed towards second tier stocks, consequently suppressing value traded.

Apart from rocky politics, July saw macroeconomic concerns somewhat cloud the shine in the country's growth trajectory. Chief among these concerns were the external account situation and revenue generation. A surprise devaluation by the central bank, of the Rupee caused jitters, even though it was subsequently reversed by the GOP. The IMF voiced some differences with the GOP over macro stability.

That said, companies remain upbeat over growth projections. KEL announced USD1bln investment, four auto companies were allowed to set up assembly plants.

Top scrips by value traded were SNGP, ISL, TRG, ENGRO and DGKC. Volume leaders were POWERR, BOPR2, TRG, KEL, ANL, EPCL and BOP.

Top performers among active scrips were SSGC, PPL, ISL.
Worst performers were HCAR, PSMC, ACPL, KOHC, LUCK, FFC, UBL, HBL and DGKC.  Cement stocks came under pressure over capacity concerns, while HBL took a hit because of worries over imposition of a heavy fine in the USA.

Outflow during the month was USD38mln compared to an inflow of USD 7.9mln. We expect investor focus to follow individual earnings annoucements as sectoral excitement recedes. With the PM's disqualification out of the way, the prospective election of Shahbaz Sharif will ensure political continuity, strengthening growth prospects for the country. Sectors that offer hedge against currency devaluation, Power, E&P's are likely to perform better.