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 5.5%WoW to 40,556pts, as investors reacted positively to USD6.0bn support package from Saudi Arabia. During the week, market participation improved as evident from ADT and ADTV which increased by 51.1%WoW and 53.6%WoW, respectively. However, foreign investors continued to remain net seller, exhibiting an outflow of USD17.2mn.
During the week, ECC approved a 33% hike in power tariff (PKR1.27/unit) to recover additional PKR144bn from consumers. Furthermore, a Saudi consortium is proposing to establish five desalination projects in Pakistan with an investment of USD2.0bn. Pakistan is planning to build a grain terminal with an investment of USD200mn, which help take pressure off the existing grain terminal at Port Qasim. Pakistan Sugar Mills Association (PSMA) expressed disappointment regarding the stringent conditions placed by the government over the export of 1.0mn tons of sugar, especially over the decision to commence crushing season earlier than previous years.
On the macro front, SBP foreign exchange reserves declined to USD7.8bn, a decline of USD264mn, owing to external debt servicing and official payments. During 1QFY19 the country’s current account deficit narrowed 2.6% to USD3.67bn as robust growth in remittances covered the trade deficit to some extent with foreign exchange reserves having fallen to cover less than two months of imports.
Furthermore, despite receiving USD6.0bn package from Saudi Arabia, it is expected that the country will still approach IMF for a bailout package.
Outlook
We believe that the ability of the government to fund external account would shape the market sentiment. Moreover, the ongoing result season would also play its role in dictating the direction of individual stocks.
News This Week
Economic highlights & Data points
Foreign exchange: SBP’s reserves fall USD264mn, stand at USD7.8bn (Tribune): The foreign exchange reserves held by the central bank continued to spiral downwards for the ninth successive week as they fell 3.26% on a weekly basis, according to data released on Thursday.
Country still needs IMF bailout package (The Nation): Pakistan would still approach International Monetary Fund (IMF) for bailout package despite the fact that it has received package from Saudi Arabia.
PM secures USD6.0bn support from KSA (The Nation): Pakistan Tuesday took a big step forward to avert the International Monetary Fund program as Saudi Arabia agreed to provide USD3bn for one year as balance of payment support and a further one-year deferred oil payments facility for up to USD3.0bn.
C/A deficit narrows 2.6% in July-Sept (The News): Current account deficit narrowed 2.6% to USD3.67bn in the first three months of FY19, the central bank’s data showed on Monday, as robust growth in remittances supported the economy with foreign exchange reserves having fallen to cover less than two months of imports and debts.
Rupee regains 1.4% as financial support pledged (The News): The rupee recovered 1.4% against the US dollar in the interbank market on Wednesday after Saudi Arabia pledged USD6.0bn financial support to stabilize Pakistan’s ailing economy, traders said.
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Sector and Corporate highlights
ECC raises power tariff but lets poor off hook (The Nation): The government on Wednesday approved up to 15% increase in the electricity tariff but guarded the poor consumers against its direct impact. The Economic Coordination Committee (ECC) of the cabinet also decided to continue with the subsidy in tariff for the agriculture sector and keep the power price unchanged for commercial and industrial consumers using up to 5kwh electricity.
Desalination projects: Saudi consortium offers to make USD2bn investment (The News): A Saudi Consortium has reached Islamabad with an offer to establish five desalination projects in Pakistan with an investment of USD2bn in five years.
Master group to set up 99MW hydropower project (The News): Master Hydro Power, a joint venture of Master Textile Mills and Chinese Huadong Engineering Corporation, won the bid to set up 99 megawatts of hydroelectricity project in Chitral, an official document said on Tuesday.
Pakistan plans USD200mn grain terminal: Bloomberg (The News): Pakistan plans to invest about USD200mn to build a second grain terminal as the nation’s only dedicated facility struggles to meet demand for shipping oil seeds, cereals and fertilizer, Bloomberg reported. The state-run Pakistan National Shipping Corp. (PNSC) will build the terminal in Karachi, Rashid Siddiqi, an executive director at the company, said in an interview.
PKR9.15bn development schemes approved for Sindh| (Dawn): Two schemes were approved for the Law Department. These include construction of residential complex for officials of High Court of Sindh at Milk Plant Site worth PKR1,198mn and construction of courts at District Court Building, Korangi worth PKR1,262mn.
Export of 1mn tons of sugar: PSMA disappointed over government’s strict terms (BR): Pakistan Sugar Mills Association (PSMA) has expressed disappointment on government’s decision regarding stringent conditions for export of 1mn tons of sugar.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 58.6 | 61.7 | 5.2% |
| Avg. Dly T/O (mn. shares) | 199.2 | 301.0 | 51.1% |
| Avg. Dly T/O (US$ mn.) | 49.1 | 75.5 | 53.6% |
| No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
| KSE 100 Index | 38,430.3 | 40,556.5 | 5.5% |
| KSE ALL Share Index | 28,422.7 | 29,667.8 | 4.4% |