Market Review
The outgoing week remained volatile throughout the week owing to the lack of clarification on monetary assistance from China where KSE100 index exhibited a decline of 1.5%WoW to 41,389pts. Additionally, market participation remained dull as evident from ADT and ADTV which decreased by 28%WoW and 25%WoW, respectively. Foreign investors continued to remain net seller, exhibiting an outflow of USD9.4mn.
During the week, Cement dispatches posted a volumetric growth of 5.4%YoY in 4MFY19 where exports recorded an impressive double digit growth of 39%YoY. Additionally, ECC approved import of 50K tons of urea to bridge the deficit in the country for the ongoing winter crop season. Furthermore, during 4MFY19, FO and HSD sales witnessed a steep decline of 68%YoY and 17%YoY, to 1.1mn tons and 2.6mn tons, respectively. Moreover, EPCL entered into an agreement with IFC for a loan facility of USD35.0mn for its expansion of PVC plant. The Canadian government also slapped a preliminary antidumping duty within a range of 10%-58% on import of carbon steel welded pipes from Pakistan.
On the macro front, SBP foreign exchange reserves declined by USD98mn to USD7.7bn owing to external debt servicing and official payments. Additionally, inflation for Oct’18 touched the peak of 7.0%, a 49-month high where core inflation increased to 51-month high of 8.2% in Oct’18 as against 8.0% in the prior month. In a move to reduce reliance on USD, China and Pakistan decided to trade in yuan to alleviate the burden on country’s dollar reserves. Lastly, China agreed to double its imports from Pakistan to USD3.2bn over the period of next 2yrs.
Outlook
We believe that the clarity on loan from China and prospective inflow from the agreed amount of USD6.0bn from KSA would be a key trigger to rebuild the investor’s confidence in the market. As the country is currently negotiating with the IMF delegation to seek bailout package, any development in this regard would shape the direction of market thereon. Furthermore, MSCI quarterly review is scheduled on Nov 13, 2018 where Pakistan faces a risk of deletion of 2 stocks (UBL and LUCK) therefore; any likely deletion would be a dampener for the market resulting in additional short term outflows by foreign participants.
NEWS THIS WEEK
Economic highlights & Data points
Trade in Yuan to reduce burden on USD reserves (BR): Terming the Prime Minister Imran Khan’s China visit as highly successful, Information Minister Fawad Chaudhry Monday said Pakistan and China will start trading in yuan instead of USD that would reduce burden on the country’s dollar reserves.
Inflation hits four-year high (BR): The annual inflation rate in Pakistan has jumped from 5.1% in September to 7.0% in October, the highest in four years, as a result of increase in prices of gas, fuel and eatable items as well as rupee devaluation, said Pakistan Bureau of Statistic (PBS) on Friday.
Exports to China will double in FY19 (Dawn): China has agreed to increase its imports from Pakistan to USD2.2bn by end of 2019 from the existing level of USD1.2bn and to USD3.2bn by end of next fiscal year.
Forex reserves fall to USD14.1bn (The News): Pakistan’s foreign exchange reserves dropped 0.8%, or USD116mn in the week ended November 2, the central bank reported on Thursday. Total reserves of the country stood at USD14.1bn, compared with USD14.2bn recorded in the previous week.
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Sector and corporate highlights
Canada slaps anti-dumping duties on Pakistani steels (The News): Canadian government has slapped up to 58% anti-dumping duties on Pakistani steel exporters, a move that rarely happened for the country that often takes such measures to protect its local metal producers.
IFC pledges USD35mn Ijarah financing for Engro project (The News): The International Finance Corporation (IFC), a member of the World Bank Group, has agreed to extend shariah-based loan of USD35mn to Engro Polymer and Chemicals to support its expansion project.
Cement exports grow 39% in four months (The News): Cement sector recorded a 5.4%YoY increase in sales and exports to 15.4mn tons during the first four months of the current fiscal year of 2019, industry data showed on Wednesday.
ECC approves 50,000tns of urea import to meet winter demand (The News): The Economic Coordination Committee (ECC) of the cabinet on Wednesday approved import of 50,000 tons of urea on immediate basis to avert shortage of the key nutrient in the ongoing winter crop season.
POL sales decline 32%YoY in October (The News): Overall petroleum products sales declined 32% to 1.65mn tons in October 2018, primarily because of shifting of power generation from furnace oil (FO) to RLNG and coal-based generation resulting in lower demand of FO, as per latest petroleum sales data issued on Tuesday.
IMF dissatisfied with power sector performance (Nation): The International Monetary Fund (IMF) on Thursday expressed dissatisfaction over the performance of Pakistan’s power sector and recommended to improve the revenue collection by reducing the line losses and collection of electricity bills.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 63.3 | 61.4 | -2.9% |
| Avg. Dly T/O (mn. shares) | 322.3 | 233.1 | -27.7% |
| Avg. Dly T/V (US$ mn.) | 95.2 | 71.1 | -25.4% |
| No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
| KSE 100 Index | 42,004.1 | 41,388.9 | -1.5% |
| KSE ALL Share Index | 30,463.5 | 29,935.3 | -1.7% |