Market Review
During the outgoing roll-over week, the benchmark index witnessed multiple negative sessions and closed in red at 40,496pts, a decline of 0.9%WoW. We accredit today’s negative session to another round of currency depreciation where PKR made an intraday high of PKR144, depreciation of 7.5%, and anticipation of further hike in policy rate. Market participation remained dull during the week as evident from decline in ADT by 3.1%WoW, however, ADTV increased by 28%WoW. Foreign investors continued to remain net seller, exhibiting an outflow of USD51mn.
During the week, new entrants opposed PSMC’s attempt to seek greenfield status to set up a new plant and avail the same benefits offered to new players in Auto Policy. Additionally, the government decided to issue Islamic bonds worth PKR100bn-PKR200bn to address the issue of mounting circular debt and announced to supply uninterrupted gas to commercial and domestic users during Dec’18-Feb’19. Also, sugar mills refused to start crushing due to higher cost of doing business. Moreover, the government’s development expenditure reduced in 5MFY19 where only 22% of the total PSDP funds are disbursed so far.
On the macro front, country’s foreign exchange reserves increased to USD14.6bn from USD13.7bn, up 6%WoW post arrival of financial support from KSA. Also, LSM sector posted a growth of 1.8%YoY in Sep’18 where major support came from increase in pharmaceuticals by 13%YoY. Moreover, budget deficit increased to 1.4% of the GDP in 1QFY19 as opposed to 1.2% in the SPLY. Furthermore, the Commerce Division finalized the 5yr Strategic Trade Policy Framework subject to the approval of Federal Cabinet in order to boost exports of the country.
Outlook
With the Central Bank’s decision to raise policy rate by 150bps coupled with today’s currency depreciation, we expect market participation to remain dampened in the coming week. Additionally, the direction of market remains contingent upon developments on G20 meeting (scheduled today and tomorrow) and OPEC’s meeting (scheduled on Dec 06, 2018).
News This Week
Economic highlights & Data points
Forex reserves rise to USD14.6bn (The News): Pakistan’s foreign exchange reserves surged 6.24% to USD14.6bn during the week ended November 23. The forex reserves stood at USD13.7bn in the preceding week. The foreign exchange reserves held by the State Bank of Pakistan increased USD776mn to USD8.1bn due to official bilateral inflows, the SBP said.
Pakistan raises USD1.5bn in loans, grants in July-Oct (The News): Pakistan has bagged around USD1.5bn in foreign economic assistance from various bilateral, multilateral and banking sources during the 4MFY19 – inflows which analysts said are much below the projected financing required to support the wobbly economy.
Budget deficit continues to widen (BR): The budget deficit continues to grow in spite of government’s austerity drive and increased to 1.4% of GDP during the first three months of the current fiscal year as opposed to 1.2% for the same period a year before.
Imran directs finalization of trade, tariff policies by end of December (Dawn): Prime Minister Imran Khan has directed the Commerce Division to finalize three strategic policy documents ahead of Dec 31. The official said the premier has asked the division to finalize a draft five years trade policy for 2019-2024 with a string of measures to enhance export competitiveness and productivity of the domestic industries.
Big industry expands 1.8%YoY in September (Dawn): The large-scale manufacturing (LSM) sector grew 1.8% during September, according to the latest data released by the Pakistan Bureau of Statistics. The growth in LSM came on the back of 13% increase in production of pharmaceuticals, non-metallic mineral products 11%, rubber 8% paper and board 6%, leather products 4%, food and beverages 4%, automobiles 1%, and engineering products 2%.
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Sector and Corporate highlights
Government mulls up to PKR200bn sukuk for circular debt (The News): Government planned to issue an Islamic bond to clear mounting circular debt that’s been haunting energy sector for long with the size of the instrument estimated between PKR100bn to PKR200bn.
Sugar mills refuse crushing on unfair price (The News): Sugar mills on Monday refused to start crushing till the government removes the existing mismatch between prices of sugarcane and sugar that they said would render them PKR15/kg of loss.
New entrants object to Pak Suzuki’s demand (Dawn): Chinese, Korean and French car makers have strongly opposed the move by Pak Suzuki Motor Company Ltd (PSMCL) seeking same benefits/incentives that are marked for new players under the Auto Policy 2016-21.
Government releases PKR151bn under PSDP (BR): Pakistan Tehreek-e-Insaf (PTI) government has released PKR151bn (22.4%) including PKR30bn foreign aid for different development projects under the Public Sector Development Programme (PSDP) 2018-19 against the total budgeted allocation of PKR675bn.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 60.4 | 58.0 | -4.0% |
| Avg. Dly T/O (mn. shares) | 156.9 | 152.0 | -3.1% |
| Avg. Dly T/V (US$ mn.) | 55.6 | 71.2 | 28.0% |
| No. of Trading Sessions | 4.0 | 5.0 | 1.0 |
| KSE 100 Index | 40,869.3 | 40,496.0 | -0.9% |
| KSE ALL Share Index | 29,500.7 | 29,381.7 | -0.4% |