Market Review
The outgoing week continued the upbeat momentum where benchmark index closed at 41,113pts, exhibiting an increase of 2.1%WoW. Market participation remained lackluster as evident from an increase in ADT by 3.8%WoW while ADTV declined by 5.8%WoW, respectively. Foreign investors remained net buyers, exhibiting an inflow of USD12.3mn. During the week, the government announced a reduction in the prices of petrol by PKR0.59/ltr while the price of HSD remained unchanged. Additionally, Economic Coordination Committee approved the launch of a PKR200bn sukuk to help partially clear mounting circular debt in the power sector. Furthermore, the government has imposed a moratorium on the establishment of new oil marketing companies (OMCs) until it increases the minimum investment requirement for future investors. Also, Kia Lucky Motors Pakistan Limited (KLM) announced that it will begin commercial production of vehicles by Sept’19. On the macro front, foreign exchange reserves of SBP increased by USD1.5bn to USD8.2bn, up by ~23%WoW, owing to the inflows received from UAE and Saudi Arabia during the week. In a bid to further suppress the demand in order to stabilize the economy, SBP increased the policy rate by 25bps to 10.25%. The central bank also trimmed its forecast for economic growth for FY19 citing a weaker outlook for public finance and external imbalances weighed to the downside. In order to secure much-needed foreign exchange reserves to stabilize the country’s economy, the government launched “Pakistan Banao Certificates” to tap into the savings of overseas Pakistanis. Moreover, the ratings agency Moody’s Investor Service, termed the mini budget measures insufficient to curb fiscal deficit, where the country’s fiscal deficit is expected to reach 6.0% of GDP.
Outlook
With upcoming financial result of companies, we expect fundamentals to take the front seat and earnings expectations to drive the Index.
News This Week
Economic highlights & data points
Forex reserves rise to USD14.802bn (The News): Pakistan’s foreign exchange reserves rose 11.7% to USD14.8bn during the week ended January 25; following financial inflows from the friendly countries, the central bank said on Thursday. The forex reserves held by the State Bank of Pakistan increased to USD8.2bn from USD6.6bn a week ago.
SBP ups policy rate to 10.25% (The News): Highlighting four major challenges being faced by the country’s economy including persistence surge in twin deficits, the State Bank of Pakistan (SBP) on Thursday slightly hiked the discount rate by 25bps to 10.25% in a bid to further suppress the demand for stabilizing the economy.
‘Pakistan Banao’ bond for Pak expats (The News): While granting an exemption from paying the withholding tax and no compulsory deduction of Zakat, Prime Minister Imran Khan on Thursday launched the much-awaited Pakistan Banao Certificate to provide opportunity to overseas Pakistanis with minimum investment requirement of USD5,000 and without having any upper limit.
Mini-budget lacks solutions for fiscal constraints: Moody’s (The News): Pakistan’s recently announced mini budget lacks new solutions to address its fiscal constraints and debt sustainability will largely remain at risk, ratings agency Moody’s Investors Service said on Thursday.
SBP first quarterly report: Achieving 6.2% growth unlikely (The News): The State Bank of Pakistan (SBP) on Tuesday further trimmed its forecast for economic growth for the ongoing fiscal year 2018-19, citing a weaker outlook for public finance and external imbalances weighted to the downside. In its first quarterly report on the state of economy, the 6.2% target for real GDP growth seemed unachievable with the policy focus now tilted towards macroeconomic stabilization.
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Sector and Corporate highlights
Govt reduces petrol price by PKR0.59 for February (Dawn): The government on Thursday announced a reduction in the prices of various petroleum products for the month of February.
Construction sector hit by fiscal consolidation, inflation (The News): The construction sector, long a beneficiary of cheap credit-fuelled building boom, slowed sharply in the first quarter of current fiscal year as a result of a negative impact of monetary tightening, a slash in government development spending, and high inflation, central bank report said.
Asad rejects request to abolish super tax on banking industry (Dawn): Finance Minister Asad Umar has rejected the Pakistan Banks Association (PBA) request to either abolish super tax or restore the cascading relief announced earlier as provided for the banking sector.
Govt approves PKR200bn sukuk to ease circular debt (The News): The Economic Coordination Committee (ECC) of the Cabinet on Tuesday approved the launch of a PKR200bn sukuk to help clear part of mounting circular debt in the power sector, a statement said. The ministry of power informed the ECC, chaired by finance minister Asad Umar that total circular debt stood at PKR1.614trn at the end of 2018.
Govt imposes moratorium on new oil marketing companies (Dawn): In a sudden move, the government has imposed a moratorium on the establishment of new oil marketing companies (OMCs) until it increases the minimum investment requirement for future investors.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | Change | |
| Mkt. Cap (US $ bn) | 58.0 | 59.1 | 1.9% |
| Avg. Dly T/O (mn. shares) | 168.5 | 174.8 | 3.8% |
| Avg. Dly T/V (US$ mn.) | 52.5 | 49.4 | -5.8% |
| No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
| KSE 100 Index | 40,264.8 | 41,112.7 | 2.1% |
| KSE ALL Share Index | 29,367.7 | 29,826.0 | 1.6% |