Market Review
The benchmark index started off on a negative note, however, managed to close in green in the outgoing week, exhibiting an increase of 2.4%WoW to 38,430pts, post imposition of regulatory duties on luxury and non-essential items to control the rising import bill. During the week, market participation improved as evident from ADT which increased by 13%WoW, however, ADTV declined by 5%WoW. However, foreign investors continued to remain net seller, exhibiting an outflow of USD19mn.
During the week, Indus Motor Company increased the price of its vehicles in the range of PKR50k – PKR175k for the deliveries in Nov’18/Dec’18 and the range of PKR100k – PKR350k from Jan’19 onwards. Additionally, adviser to the PM proposed to bring down the duties on raw material for textile sector to zero along with an aim to increase the cotton production target to 15.0mn bales. Also, import bill for oil jumped up by 19%YoY in 1QFY19 to USD3.8bn as compared to USD3.2bn in SPLY. Moreover, ECC decided to provide uninterrupted domestic gas and imported LNG to five zero-rated export oriented sectors. Besides, Punjab government slashed 63% of its Annual Development Program for FY19 to PKR238bn as opposed to the initial outlay of PKR635bn.
On the macro front, SBP foreign exchange reserves declined to USD14.6bn as opposed to USD14.9bn in the last week owing to external debt servicing payment. Moreover, FDI in the country decreased by 43%YoY to USD440mn in 1QFY19 where the major share came from China. Additionally, gross public debt of the country rose to 72.5% of the GDP in FY18 in comparison to 67% in the SPLY. Furthermore, LSM for 2MFY19 decreased by 1.2%YoY where National Economic Council has set a target of 8.1%YoY for the year.
Outlook
We believe that the clarity on government’s decision to fund external account either through IMF or borrowing from friendly countries would shape the market direction. However, positive news on sources of financing with regards to PM’s visit to Saudia Arabia in next week to seek financial assistance could act as a trigger. Moreover, the ongoing result season would also play its role in dictating the direction of individual stocks.
NEWS THIS WEEK
Economic highlights & Data points
Forex reserves fall to USD14.6bn (The News): Pakistan’s foreign exchange reserves fell 1.6% to USD14.6bn during the week ended October 12, the central bank said on Thursday. The reserves stood at USD14.9bn in the previous week. The reserves held by the State Bank of Pakistan (SBP) decreased by USD219mn to USD8.1bn due to external debt servicing and other official payments.
FDI drops 42.6% to USD439.5mn in 1QFY19 (The News): Foreign direct investment (FDI) flows into the country dropped 42.6% to USD439.5mn in the 1QFY19, dragged down by continuously declining Chinese inflows, eroding investor trust, and macroeconomic concerns.
Domestic and external debt grow 16.5% in FY18 (BR): Fiscal and current account deficits along with depreciation of exchange rate, led to increase in public debt accumulation during FY18. According to State Bank of Pakistan’s annual report issued Thursday, compared to an 8.8% increase in FY17, public debt grew by 16.5% during FY18.
LSM falls 1.2% in July-August (The News): Large scale manufacturing (LSM) fell 1.2%YoY for 2MFY19 as industrial activities slowed down during the period, official data showed on Wednesday. “The production in 2MFY19 as compared to 2MFY18 has significantly decreased in coke and petroleum products, pharmaceuticals, nonmetallic mineral products and fertilizers while it has increased in food, beverages and tobacco, electronics and paper and board,” the Pakistan Bureau of Statistics (PBS) said in a statement.
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Sector and Corporate highlights
IMC drives up car prices (The News): Indus Motor Company (IMC) has revised the retail prices of its vehicles upwards, citing a massive devaluation of rupee against dollar has bloated its manufacturing cost big time, a statement said on Wednesday.
Duties on textile raw material to be brought down to zero percent: Dawood (BR): Adviser to Prime Minister on Commerce, Textile, Industry and Investment, Abdul Razzak Dawood Wednesday said customs/regulatory duties on the import of raw materials and inputs used by textile sector would be brought down to zero percent, while cotton production will be increased to 15mn bales for the revival of textile sector.
Govt notifies regulatory duties on luxury imports (The News): Government on Tuesday notified up to 60% regulatory duties on 570 luxury and non-essential imported goods — a move aimed at to curtail trade deficit, which is the main factor behind widening current account gap.
Oil import bill swells 19% (Dawn): The country’s oil import bill surged by 19%YoY to USD3.8bn during the first quarter of this fiscal year as against USD3.2bn over the corresponding months last year, with the largest surge coming from crude oil, up 48%YoY, according to data released by the Pakistan Bureau of Statistics (PBS).
Five export sectors to get priority in gas supply during winter (Dawn): The Economic Coordination Committee (ECC) of the Cabinet on Tuesday amended the natural gas load management policy for winter shortages to upgrade five zero-rated export sectors on the priority list after domestic and commercial consumers.
Punjab slashes development budget by more than half (Dawn): The Punjab government on Tuesday unveiled PKR238bn Annual Development Program (ADP) for FY19, which is 62.5% down from PKR635bn set by the previous government for preceding fiscal year.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 58.4 | 58.6 | 0.4% |
| Avg. Dly T/O (mn. shares) | 176.1 | 199.2 | 13.1% |
| Avg. Dly T/O (US$ mn.) | 51.8 | 49.1 | -5.1% |
| No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
| KSE 100 Index | 37,517.9 | 38,430.3 | 2.4% |
| KSE ALL Share Index | 27,767.5 | 28,422.7 | 2.4% |