Cyclicals to slide, Buy defensive: Foundation Securities

November 23, 2018 (MLN): Investors’ sentiments are likely to be hurt due to IMF’s statement regarding slowdown in growth to 4% versus 5.8% last year on back of policy uncertainty and economic imbalances, opined by Mr. Muhammad Awais Ashraf, Chief Financial Analyst at Foundation Securities in his research report.

Talking with Mettis Link News he added that the devaluation of rupee and imposition of different custom and regulatory duties would increase the cost of doing business, and this will lead to slowdown in growth.

The increase in foreign reserves by $1 billion will have no impact on Current Account Deficit (CAD) in the long-run, as it is only likely to cover above 2 months’ import bills, he added.

The report further recommends buying Banks (UBL, HBL, BAFL, BOP) on uptick in interest rates, accumulation in E&Ps (OGDC PA, PPL PA & POL PA) on lucrative valuations, Fertilizers (FFC PA & FFBL PA) on better farmer economics and supply constraints of urea.

Oil prices are expected to rebound from the current level in short run due to production cuts from OPEC and N-OPEC members, uptick in seasonal demand due to colder Northern Hemisphere winter and a question marks on conditionality of waiver granted to eight countries, Mr. M. Awais Ashraf said in another research report.

He further added that, in long run oil prices will not come down, it may rebound or sustain, it will lead to some adjustment in electricity prices with inflation, market would remain at the same level or may go down slightly.

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