Market Review
Stock market remained volatile throughout the week, however the benchmark KSE100 index closed almost flattish, reporting a decrease of 493ptsWoW (1.1%) to 44,809pts. ADT and ADTV witnessed a decline of 4%WoW and 3.2%WoW, respectively as lack of triggers kept investors at bay. After hefty buying spree in the initial weeks of CY18, foreign investors have remained net seller for the second successive week with a net outflow of USD8.5mn.
During the week, All Pakistan Cement Manufacturing Association (APCMA) released cement dispatches numbers showing an increase of 15%YoY to 26.3mn tons for 7MFY18 taking capacity utilization to 96%. Additionally, Byco Petroleum Pakistan reported an increase in its production capacity of gasoline to 1,500 tons/day (from 300 tons/day). Moreover, Fauji Foods Limited has signed an agreement with an Australian partner to set up 20 milk collection centers in Punjab to address demand supply gap of 3.5bn liters of milk in the country. Furthermore, Pakistan Steel Mills Association (PSMA) has written a letter to PM requesting to withdraw the disputed duty and tax exemptions offered to a Chinese company, saying the concession will cost the national exchequer about PKR11bn.
On the macro front, country’s total foreign exchange reserves have declined by USD173mn to USD19.2bn on the back of external debt servicing. Also, government is in process of announcing two independent tax amnesty schemes in near future with a view of attracting Pakistani money lying in foreign banks. Additionally, Sindh High Court has barred FBR from collecting custom and regulatory duties which were recently levied on the import of luxury items. Moreover, a recent report by SBP revealed that banks have lent PKR115bn to loss making PSEs during 7MFY18 depicting an increase of 45% compared to same period last year.
Outlook
With result season just around the corner, we expect corporate earnings announcements to drive the index performance in the coming weeks. However, swings in the global equity markets will also play a role in dictating the market performance.
NEWS THIS WEEK
Economic Highlights & Data Points
Foreign exchange: SBP’s reserves decline 1.31%, amount to USD13.1bn (Tribune): Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased 1.31% on a weekly basis, according to data released on Thursday by the central bank, marking the eighth successive week of decline.
Local & foreign assets: two amnesty schemes in the offing (BR): The government is planning to introduce two separate amnesty schemes aimed at legalizing undisclosed local and foreign assets held by Pakistanis at home and abroad less than four months before the completion of its tenure. The opposition parties termed the timing of the schemes ”inappropriate” as the Pakistan Muslim League-Nawaz (PML-N) government has four months left to complete its tenure. They demanded parliamentary debate prior to launching of the schemes.
Credit to loss-making state-run enterprises up 45% (Dawn): The loss-making public sector enterprises (PSEs) borrowed PKR115bn during the first seven months of this fiscal year, reflecting the government’s utter failure to make them profitable. A latest report by the State Bank of Pakistan showed that banks extended PKR115.58bn loans to PSEs during the July-January period of FY18 while the government already borrowed PKR368bn for budgetary support during the same period.
SHC quashes regulatory duty on non-essential imports (The News): Sindh High Court on Wednesday restrained the Federal Board of Revenue (FBR) from collecting regulatory duty imposed three months ago on non-essential imports. The court declared the notification (1035(I)/2017) issued by FBR ‘illegal’ in an order passed in a ‘reserved judgment’ by a division bench comprising justice Muneeb Akhtar and Omar Sial.
Projects worth PKR155bn approved (Dawn): The Executive Committee of the National Economic Council (Ecnec) on Wednesday approved eight development projects, mostly in the social sector, at an estimated cost of PKR155.26bn. In a meeting presided over by Prime Minister Shahid Khaqan Abbasi, Ecnec also approved a few projects which will be mostly executed in Punjab and Sindh ahead of general election.
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Sector And Corporate Highlights
Cement dispatches rise 12% despite poor exports (Dawn): Total cement dispatches remained 22.24mn tons in the first half of 2017-18, up 12.3% from a year ago. Capacity utilization stood at 95% in the six-month period, according to data released by the All Pakistan Cement Manufacturers’ Association (APCMA) on Thursday. Domestic consumption stood at 19.83mn tons in the first six months of this fiscal year, up 17.4% year-on-year. A continuous decline in exports affected overall growth. Exports dropped 17.3% to 2.41mn tons during the period under review.
Byco brings five-time raise in gasoline production (The News): Byco Petroleum Pakistan brought its gasoline output up five times to 1,500 tons/day as the company’s second unit started production. At the current level of crude processing at the Byco oil refining complexes I and II i.e. 75,000 barrels/day, the cumulative motor gasoline production has increased five times from 300 tons/day to 1,500 tons/day.
Steel melting industry opposes tax break for Chinese firm (Tribune): Pakistan Steel Melters Association (PSMA) has fiercely opposed the grant of duty and tax exemptions to China State Construction Engineering Corporation Limited (CSCEC), saying the concession will cost the national exchequer about PKR11bn.
LNG deal with Qatar signed at higher rates, says audit report (Tribune): A special audit of the multibillion-dollar Qatar liquefied natural gas (LNG) deal has failed to quantify the magnitude of losses despite claims by federal auditors that Pakistan purchased the gas at higher rates. The Joint Audit Special Study raised 32 objections involving more than Rs304 billion, but none of them was directly linked to the 15-year deal that the PML-N government struck with Qatar on a government-to-government basis.
Australia partners with Fauji Foods to set up milk collection centres in Punjab (Nation) Positive: The Australian Government-funded Market Development Facility (MDF) and Fauji Foods Limited signed a partnership on Tuesday to establish 20 milk collection centres in rural Layyah and Muzaffargarh, Southern Punjab. Extending the commercial network for milk procurement will help to address Pakistan’s annual milk supply-demand gap of 3.5bn litres. The milk collection centres will also deliver critical information to farmers on best practice in milking, vaccination and animal husbandry.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This week | % Change | |
| Mkt. Cap (US $ bn) | 83.0 | 82.3 | -0.8% |
| Avg. Dly T/O (mn. shares) | 255.2 | 244.9 | -4.0% |
| Avg. Dly T/O (US$ mn.) | 90.1 | 87.2 | -3.2% |
| No. of Trading Sessions | 5.0 | 4.0 | 0.0 |
| KSE 100 Index | 44,301.2 | 43,808.8 | -1.1% |
| KSE ALL Share Index | 31,887.2 | 31,656.2 | -0.7% |