Market Review
The outgoing week closed at 44,537pts, down by 2.2%WoW where FY19 budget failed to excite market participants despite the removal of tax on bonus shares as well as reduction in corporate tax rate. The participants were deterred by the government’s announcement to continue super tax till FY21 coupled with the failure to remove capital gains tax. The activity during the week remained lackluster as evident from a decline in both ADT and ADTV by 1.6%WoW and 21.5%WoW, respectively. However, foreign investors were net buyers, exhibiting a net inflow of USD0.6mn.
During the week, ASTL began the commercial operations of its new rolling mill at Dhabeji, increasing its rebar production capacity to 605k tons per annum. Furthermore, OGRA proposed to grant 33 licenses to promote the LPG sector as well as to ensure smooth supply. On the flip side, Moody’s has termed the continuation of super tax negative for the banking sector. Moreover, the FED on cements increased by PKR12.5/bag in the budget. During the week Supreme Court ordered cement factories to submit a payment plan for the consumption of water.
On the macro front, country’s foreign exchange reserves increased by USD593mn as Pakistan received a USD1bn commercial loan from a Chinese bank. Furthermore, ADB raised concerns over the country’s debt burden as a result of CPEC projects. Additionally, IMF also highlighted Pakistan’s increasing macroeconomic vulnerabilities and projected FY19 growth at 4.7% as opposed to the government’s predicted growth rate of 6.2%.
Outlook
The market is expected to remain choppy amid advent of ramazan and lack of triggers.
NEWS THIS WEEK
Economic highlights & Data points
ADB raises concern over CPEC’s debt burden on finances | (The News): The Asian Development Bank (ADB) on Thursday raised concern about the debt burden of China Pakistan Economic Corridor- (CPEC) led infrastructure projects on Pakistan’s fragile finances.
ADB rules out need for IMF’s bailout money | (The News): Pakistan will probably not need bailout money from any international lender to tackle its deteriorating external account position as the country has options to raise funds from neighbouring China or from international capital market, a senior official at the Asian Development Bank (ADB) said on Thursday.
Reserves up as USD1bn received from Chinese bank | (BR): As Pakistan has received inflows of some USD1bn from a Chinese bank as commercial loan, the State Bank of Pakistan’s (SBP) foreign exchange reserves were increased by some USD593mn in a week. The country initiated talks with a Chinese financial institution in February this year to obtain USD1bn commercial loan as its foreign exchange reserves were on decline due to higher current account deficit and external debt servicing.
IMF sees mounting risks, sharp drop in growth for Pakistan next year | (Dawn): The International Monetary Fund projected on Wednesday that Pakistan’s growth will moderate to 4.7% in fiscal year 2019 from 5.6% in 2018. In its regional economic outlook update for the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region on Wednesday, the IMF notes that “an increase in macroeconomic vulnerabilities and domestic policy slippages have weakened Pakistan’s economic outlook, with growth now projected to moderate to 4.7% in FY19”.
Inflation rate soars to 3.7% in April | (BR): The inflation rate increased to 3.7% in April 2018 as compared to 3.2% during last months, according to data released by the Pakistan Bureau of Statistics (PBS) here on Wednesday. The PBS data revealed that the inflation, measured through Consumer Price Index (CPI), went upward in April after witnessing a declining trend in the past three months.
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Sector and Corporate highlights
Industry ministry yields to NFML’s urea import proposal | (The News): Ministry of industries in a surprise move has thrown its weight behind the proposal of importing urea to meet the demand during CY18, instead of pushing the closed fertiliser plants to resume manufacturing, sources said on Thursday. National Fertiliser Marketing Ltd (NFML) has proposed the import 0.6mn tons of urea for bridging demand-supply gap during CY18.
Moody’s says super tax extension credit negative for banks | (The News): Moody’s has termed the continuation of super tax on banks credit negative, and said that after it expires in 2021, banks may see some improvement, but higher government borrowing will clip lending to the private sector.
OGRA proposes 33 licences for LPG sector | (The News): Oil and Gas Regulatory Authority (OGRA), in its annual development plan for the year 2018-19, has proposed to grant 33 licences to promote the LPG sector and ensure smooth supply of the commodity in far-flung areas, especially during peak winter season.
Katas Raj case: Water worth billions used by cement factories around temple for free, SC notes | (Dawn): The Supreme Court on Wednesday issued a two-day deadline for the factories to submit recommendations for a policy on payment of water used in the past and that to be consumed in the future.
Amreli Steels rolls out Dhabeji plant | (The News): Amreli Steels Limited’s (ASTL) new rolling mill at Dhabeji began its commercial operations on Monday, increasing the steel manufacturers rebar production capacity to 605,000 tons per annum from 180,000 tons per annum.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 81.2 | 79.4 | -2.2% |
| Avg. Dly T/O (mn. shares) | 168.5 | 165.9 | -1.6% |
| Avg. Dly T/O (US$ mn.) | 70.0 | 55.0 | -21.5% |
| No. of Trading Sessions | 5.0 | 4.0 | 1.0 |
| KSE 100 Index | 45,542.8 | 44,536.9 | -2.2% |
| KSE ALL Share Index | 32,983.6 | 32,259.2 | -2.2% |