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Karachi, May 02, 2016 (PPI-OT): Apr’16 Review: PSX mimicking oil price trend

Carrying forward its bullish momentum, KSE-100 index returned 3.8%MoM in Apr’16 to stand at 34,719points, taking CYTD gains to a decent 5.8%. Rallying oil prices (Brent: +21.7% MoM, Arab Light: +28.5% MoM) along with a strong corporate earnings season where selective sectors (Cements, Autos and Electricity) were seen on top, were key thrusting points. Exhibiting the same, volumes also took a turn for the better, with average for the month rising by a whopping 61.6% to 235mn shares against last 7mth average of 154mn shares. Despite a change for the good in volumes, foreign selling continued to be the itchy point with foreigners selling US$18.1mn worth equities taking CYTD net outflow to US$122mn.

Coming down to sector performances, mimicking global oil price trends the Oil and Gas sector was seen taking charge (+12.4% MoM) in what looks like ages, followed by Commercial Banks (+4.3%MoM) and Automobiles (+2.6%MoM) while Cements (-0.7%MoM) and Fixed Line Telecommunication (-6.4% MoM) lagged behind. Going into May’16, we feel important considerations will be: 1) MSCI EM up gradation review drawing close, 2) upcoming budget proposals and 3) political stand-off between the GoP and opposition parties over Panama investigation gaining strength, all of which can direct market performance accordingly. We remain overweight on HBL, UBL, OGDC, PPL, KAPCO, EFERT and INDU.

Volumes took a turn for the better: Remaining dismal for most part of FY16, average volumes rose by 61.6%MoM to 235mn shares in Apr’16. Similarly, average traded value also headed northwards, increasing by 34.8%MoM to US$97.6mn in Apr’16 vs. US$72.4mn in Mar’16. While local participation remained healthy with NBFCs, Banks and Mutual funds buying US$44.15mn cumulatively (against US$3.87mn in the last month), foreigners remained net sellers of US$18.1mn worth equities.

Oil and Gas sector led from the front: Taking charge, the index heavyweight Oil and Gas sector turned out to be the best performer in AKD Universe, gaining 12.4%MoM in Apr’16 as oil prices rallied on account of a weak dollar and encouraging stockpile data. Following on, Commercial Banks (+4.3%), Automobiles (+2.6%) and Personal Goods (+1.3%MoM) also closed in the green on the back of healthy earnings performance. After gaining 9.9%MoM in Mar’16, we saw profit taking in the Cement sector that returned -0.7% in Apr’16.

Outlook: With market participants remaining hopeful for an inclusion into the MSCI EM Index, we expect market to continue depicting strong performance in May’16. That said, particular consideration should be given to upcoming budget proposals and the political stand-off over Panama investigation, where any adverse development can affect market’s performance negatively.

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