Market Review
Benchmark index remained volatile throughout the week where the index closed at 37,547pts, exhibiting an increase of 1%WoW. This was mainly led by the activity on Tuesday where newsflow related to China’s financial package worth USD2.0bn alleviated concerns pertaining to external account and brought a sigh of relief across the board and the index gained by 2.5%. Market participation increased throughout the week as evident from increase in ADT and ADTV by 5%WoW and 6%WoW, respectively. Foreign investors continued to remain net seller, exhibiting an outflow of USD0.51mn. During the week, the government decreased price of petroleum products where the rate for petrol and diesel slashed by PKR4.86/ltr and PKR4.26/ltr, respectively. Additionally, circular debt increased to PKR755bn owing to higher transmission and distribution losses and lower recovery rate. Moreover, Economic Coordination Committee approved the availability of urea stock for the farmers and allocated 25mmcfd additional gas to SNGP to meet the current demand. Also, Pak Suzuki Motor increased the price of different vehicle variants within a range of PKR30K – PKR322K. Furthermore, oil sales decreased by 32%YoY to 9.2mn MT in 1HFY19 driven by a decline in FO and HSD by 67%YoY and 22%YoY, respectively. On the macro front, foreign exchange reserves of SBP plunged by USD150mn to USD7.3bn, down by ~2.3%WoW, owing to debt repayment. In addition, as per the FBR, increase in sales tax on petroleum products to a uniform rate of 17% would increase the revenue collection by PKR24bn. Furthermore, China pledged to lend USD2.0bn to provide relief to the country’s dwindling foreign exchange reserves amid balance of payment crisis. Also, Saudi’s third tranche of USD1.0bn is expected to be received during this month. Moreover, inflation for the month of December eased off to 6.2% as opposed to 6.5% in the previous month owing to decline in prices of fruits and vegetables. Additionally, with a revenue shortfall of PKR170bn owing to a meagre growth of 2%YoY in revenue collection for 1HFY19, the government is planning to impose additional PKR155bn taxes in the form of increased custom duty and general sales tax.
Outlook
Since UAE’s prince is expected to visit Pakistan on Jan 6, we expect any positive developments pertaining to materialization of USD3.0bn support package to be a key trigger for market. Furthermore, meeting with FATF scheduled next week in Sydney on Terror Financing Assessment Report would also shape the sentiments of local and foreign participants.
News This Week
Economic highlights & data points
New Year to bring additional PKR155bn tax burden (The News): The New Year is expected to dawn with a heavy tax burden for Pakistanis as the Federal Board of Revenue (FBR) is preparing a summary for imposition of an additional PKR155bn taxes from January 2019.
Inflation eases to 6.2% in December (Dawn): The country’s inflation clocked in at 6.2% in Dec 2018, according to data released by the Pakistan Bureau of Statistics (PBS) on Wednesday.
3rd tranche of USD1bn from Saudi Arabia likely this month (BR): Senate Standing Committee on Finance was informed here Wednesday that the third loan tranche worth of USD1bn from Saudi Arabia was likely to be released during current month.
China acknowledges it’s extending financial help to Pakistan (The News): China on Wednesday tentatively acknowledged it was extending financial assistance to help Pakistan boost its dwindling foreign exchange reserves.
FBR estimates PKR24bn in revenue from POL products (The News): The Federal Board of Revenue (FBR) has estimated PKR24bn in additional revenue from petroleum products during the second half of the current fiscal year of 2018/19 as a result of upward revision in sales tax rates.
Foreign exchange: SBP reserves dip 2.28%, amount to USD7.29bn (Tribune): The foreign exchange reserves held by the central bank shrank 2.28% on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
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Sector and Corporate highlights
Oil sales plunge 32% (Dawn): Pakistan’s overall oil sales plunged by 32% to 9.2mn tons in 1HFY19, led by a 67% decline in furnace oil sales to 1.45mn tons.
Pak Suzuki Motor raises prices by up to Rs322K (Tribune): Pak Suzuki Motor Company, a Japanese carmaker doing business in Pakistan for decades, has increased prices by up to Rs322K for different vehicle variants, except for its popular Mehran model, in a bid to pass the impact of rupee depreciation on to consumers.
ECC orders smooth delivery of urea to farmers (Dawn): Amid rising prices despite subsidized imported stocks, the Economic Coordination Committee (ECC) of the Cabinet on Tuesday directed the Ministry of Industries and Production to chalk out a plan for continuous and smooth operation of urea plants in the country throughout the year.
Circular debt rises to PKR755bn, PAC told (Dawn): The Ministry of Power Division on Tuesday informed the Public Accounts Committee (PAC) that the amount of circular debt had reached Rs755 billion. The ministry’s secretary, while giving a briefing to the committee, said presently the country’s installed capacity for electricity production was 33,836 MW, while the de-rated capacity was about 31,000MW.
Government cuts petrol price by PKR4.86 for January (Dawn): The government on Monday announced a decrease in petroleum prices for the month of January, slashing the rates of petrol and diesel by PKR4.86 and PKR4.26 per litre, respectively. The price of kerosene oil has been reduced by PKR0.52 and that of light diesel oil (LDO) by PKR2.16 per litre, a finance ministry statement said.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | Change | |
| Mkt. Cap (US $ bn) | 56.0 | 55.3 | -1.3% |
| Avg. Dly T/O (mn. shares) | 105.1 | 110.3 | 5.0% |
| Avg. Dly T/V (US$ mn.) | 33.9 | 35.9 | 6.0% |
| No. of Trading Sessions | 5.0 | 4.0 | -1.0 |
| KSE 100 Index | 38,251.0 | 37,167.0 | -2.8% |
| KSE ALL Share Index | 28,384.1 | 28,001.3 | -1.3% |