Market Review
Despite KSA’s announcement of package worth USD21.0bn, the outgoing week remained negative on the back of growing tensions between India and Pakistan. Consequently, the benchmark index closed in red at 40,016pts, during the week, exhibiting a decline of 1.2%WoW. Market participation remained lackluster as evident from decrease in ADT and ADTV by 22.1%WoW and 13.6%WoW, respectively. Foreign investors remained net buyers, exhibiting an inflow of USD3.5mn. Oil import bill increased by 10%YoY to USD8.7bn during 7MFY19 as opposed to USD7.9bn during the SPLY on the back of LNG imports that soared by 75%YoY. Additionally, textile exports increased by only 1.2%YoY in 7MFY19 despite currency depreciation where total exports clocked in at USD7.8bn. Furthermore, cotton production decreased by 6.8%YoY to 10.7mn bales with the lower area under cultivation. Also, ECC ordered SNGP to supply LNG to fertilizer plants – Agri Tech and Fatima Fertilizer – to ensure smooth supply of urea. Moreover, India slapped an import duty of 200% on Pakistani goods primarily constituting cement and food items. On the macro front, foreign exchange reserves of the country decreased to USD14.8bn from USD14.9bn owing to external debt payment. Additionally, Pakistan’s current account deficit shrunk by 17%YoY to USD8.4bn during 7MFY19 as opposed to USD10.1bn. This is mainly because of reduction in trade deficit by 10%YoY in 7MFY19 owing to 5%YoY decrease in imports and 2%YoY rise in exports. On the other hand, fiscal deficit stood at 2.7% of the GDP in 1HFY19 as opposed to 2.2% of the GDP in the SPLY mainly due to increase in expenditure despite cut in development spending. Moreover, FDI decreased by 18%YoY during 7MFY19 on the back of lower inflows from China.
Outlook
Any escalation in Pakistan- India tensions would dampen market sentiments. Additionally, in response to India’s imposition of 200% RD on imported goods, Pakistan may retaliate on similar grounds which may affect textile and chemical sectors.
News This Week
Economic highlights & data points
Forex reserves fall to USD14.79bn (The News): Pakistan’s foreign exchange reserves fell to USD14.79bn during the week ended February 15, compared with USD14.90bn in the previous week, the central bank reported on Thursday. The forex reserves held by the State Bank of Pakistan (SBP) dropped USD163mn to USD8.04bn.
Trade deficit in goods, services narrows 5.3% in July-January (The News): Trade deficit in goods and services narrowed 5.3% year-on-year to USD19.70bn during the first seven months of the current fiscal year of 2018/19, the central bank’s data showed on Thursday.
Current account deficit shrinks 16.7% in seven months (The News): Pakistan’s current account deficit narrowed 16.7% to USD8.42bn during the first seven months of the current fiscal year of 2018/19 due to what the government said ‘credibility of interventions’.
Budget deficit widens to 2.7% in 1HFY19 (The News): Pakistan’s budget deficit widened to PKR1.0trn or 2.7% of gross domestic product in 1HFY19, as expenditures on interest payments and defense increased during the period, official data showed on Wednesday.
July-January: FDI down 18%YoY (BR): The Foreign Direct Investment (FDI) in Pakistan declined by 18%YoY during 7MFY19, mainly due to lower inflows from China.
ECC orders uninterrupted urea supply (Dawn): The Economic Coordination Committee (ECC) of the Cabinet on Tuesday directed the Ministry of National Food Security and Research for continued operation of two urea plants — Fatima Fertilizer and Agritech — beyond the current month till October to ensure sufficient supply of the fertilizer.
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Sector and Corporate highlights
Oil imports surge to USD8.7bn in seven months (Dawn): The country’s oil import bill soared 10%YoY to USD8.7bn during 7MFY19, according to data released by the Pakistan Bureau of Statistics (PBS).
Textile exports rise 8.2%YoY to USD1.2bn in Jan (The News): Pakistan’s textile and clothing exports recorded 8.2%YoY surge to USD1.2bn in January, taking the total exports for 7MFY19 to USD7.8bn, up 1.2%YoY, as easing duties on raw materials’ imports gave impetus to the industry, official data showed on Saturday.
Cotton production short by 6.83% (Dawn): Badly hit by falling area under cultivation, use of poor quality seed and pesticides, cotton production up to Feb 15 stood short by 6.83% at 10.7mn bales over the corresponding period last year.
Budget deficit widens to 2.7% in 1HFY19 (The News): Pakistan’s budget deficit widened to PKR1.0trn or 2.7% of gross domestic product in 1HFY19, as expenditures on interest payments and defense increased during the period, official data showed on Wednesday.
ECC orders uninterrupted urea supply (Dawn): The Economic Coordination Committee (ECC) of the Cabinet on Tuesday directed the Ministry of National Food Security and Research for continued operation of two urea plants — Fatima Fertilizer and Agritech — beyond the current month till October to ensure sufficient supply of the fertilizer.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | Change | |
| Mkt. Cap (US $ bn) | 57.9 | 57.4 | -0.9% |
| Avg. Dly T/O (mn. shares) | 135.3 | 105.3 | -22.1% |
| Avg. Dly T/V (US$ mn.) | 44.6 | 38.6 | -13.6% |
| No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
| KSE 100 Index | 40,486.7 | 40,016.1 | -1.2% |
| KSE ALL Share Index | 29,331.2 | 29,016.8 | -1.1% |