Market Review
The benchmark index continued its downward trend over the period under review where the index declined to 42,261pts posting a drop of 561pts, down by 1.3%WoW owing to lack of triggers to entice investors. During the week, market participation remained lackluster as evident from ADT and ADTV that declined by 1.3%WoW and 2.8%WoW, respectively. Foreign investors exhibited a net outflow of USD10.8mn.
During the week, Central Bank data revealed that Non-Performing loans (NPLs) held by banks increased to PKR624bn in FY18 where private sector lenders accounted for more than half of the total NPL. Furthermore, in order to avert a possible crisis of urea shortage, the government is exploring the option to resume operations of 3 fertilizers plants for the next two months. Also, NEPRA allowed a hike of PKR0.36/kwh in electricity tariff for all the power distribution companies except K-Electric on account of fuel price adjustment for Jul’18. Additionally, textile sector exports dropped 16%MoM to USD1.0bn in Jul’18 as compared to USD1.2bn in Jun’18.
On the macro front, foreign exchange reserves of central bank declined to USD10.2bn, down by USD8.0mn owing to external debt repayments. It is estimated that Pakistan’s overall external debt servicing obligation would settle around USD9.3bn in FY19. Furthermore, Pakistan’s budget deficit widened to a whopping PKR2.3trn or 6.6%YoY of GDP in FY18 while the current account deficit increased to USD2.2bn in Jul’18 (an increase of 14%YoY). In addition to this, PBS data revealed that LSM registered a growth of 5.4%YoY during FY18 on the back of strong demand for steel and cement.
Outlook
We expect the performance of market to remain contingent upon the developments on political front as presidential elections are scheduled in the upcoming week. Moreover, investors will keep track of the decisions regarding the gas price hike as well as any settlement of circular debt to be made by the ECC in next week’s meeting.
News This Week
Economic highlights & Data points
Budget deficit widens to 6.6% in FY18 (Dawn): Pakistan’s budget deficit has widened to a whopping PKR2.3trn or 6.6% of gross domestic product (GDP) in the outgoing FY18.
Pakistan faces elevated external pressures on CPEC imports (The News): Ratings agency Moody’s on Friday said Pakistan is facing elevated external pressures stemming from strong domestic demand and capital-import heavy investments related to the China-Pakistan Economic Corridor.
Pakistan receives USD439mn in foreign loans in July (Tribune): International creditors have disbursed USD439mn loans to Pakistan last month, an amount that still seems insufficient to meet the country’s growing external sector requirements.
Current account deficit widens 14% to USD2.2bn in July (Tribune): The current account deficit, which is one of Pakistan’s biggest economic challenges, continued to widen in July, indicating further pressure on the rupee and foreign currency reserves.
Pakistan to pay USD9.3bn in external debt servicing (Tribune): The caretaker government, during its brief two-and-a-half-month tenure, estimated that Pakistan’s overall external debt servicing obligation would be USD9.3bn in the current fiscal year, which was slightly less than the gross official foreign currency reserves held by the State Bank of Pakistan (SBP).
World Bank vows support to bring economy back on track (The News): The World Bank will continue to extend support to government of Pakistan for implementation of the agenda for economic growth and social development being pursued by the new government.
Forex reserves fall to USD16.69bn (The News): Pakistan’s foreign exchange reserves fell 0.22% to USD16.69bn as of August 24, the central bank reported on Thursday. The foreign exchange reserves came in at USD16.72bn in the previous week.
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Sector and Corporate highlights
Textile exports drop 16%YoY after rebate reduction (Tribune): Pakistan’s textile exports dropped 16%MoM to $1.0bn in Jul’18 compared to shipments recorded in June, which stood at USD1.2bn.
LSM posts 5.4%YoY growth in FY18, missing target (The News): Large scale manufacturing (LSM) grew 5.4%YoY during FY18 as steel and cement production continued to scale up on development spending. LSM growth, however, remained much below the annual target of 6.3%.
Urea crisis: Govt plans to operationalize three closed fertilizer plants (The News): The government is going to operationalize the already closed three fertilizers plants in Punjab for two months aimed at averting the possible crisis of urea and its price hike, as farmers have started feeling the pinch that could cripple the agriculture growth.
Bad loans increase to PKR624bn till June-end (The News): Bad loans held by banks increased to PKR624bn at the end of June 2018, the central bank data showed on Tuesday, with private sector lenders accounting for more than half of the total non-performing loans (NPL).
Nepra allows PKR0.36/unit increase in electricity tariff (The News): The National Electric Power Regulatory Authority (NEPRA) on Wednesday allowed an increase of PKR0.36/unit in electricity tariff for all the power distribution companies except K-Electric on account of fuel price adjustment for July.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 70.2 | 69.9 | -0.4% |
| Avg. Dly T/O (mn. shares) | 170.9 | 168.7 | -1.3% |
| Avg. Dly T/O (US$ mn.) | 58.5 | 56.9 | -2.8 |
| No. of Trading Sessions | 2.0 | 5.0 | 3.0 |
| KSE 100 Index | 42,425.1 | 41,863.5 | -1.3% |
| KSE ALL Share Index | 30,764.8 | 30,645.1 | -0.4% |