Market Review
Although the bourse managed to close in green today, the recent hike in monetary policy deteriorated the attractiveness of equities as evident from multiple negative sessions in the benchmark index, closing the week in red at 38,562pts, a decline of 4.8%WoW. Market participation improved during the week as evident from increase in ADT by 7.5%WoW, however, ADTV decreased by 18.3%WoW. Mutual funds remained the biggest net sellers exhibiting a net outflow of USD31mn and foreign investors displayed an outflow of USD2.5mn. During the week, the Ministry of Industries and Production assured the auto sector regarding the Auto Development Policy to be implemented as is, with no existing player to be provided with Greenfield status. Additionally, the government decided to allow the export of furnace oil while putting a stop on further import of the fuel to help ease off surplus of refineries. Also, cement sales fell 7.1%YoY in November due to demand slowdown in construction and development activities. Moreover, sugar mills in Punjab started crushing after reaching an understanding with the government. Furthermore, the federal cabinet approved a supplementary grant of PKR25.7bn for subsidized gas to five zero-rated export sectors in Punjab. On the macro front, country’s foreign exchange reserves decreased to USD14.0bn from USD14.6bn, down by 4%WoW owing to external debt payments. Also, annual consumer price inflation (CPI) clocked in at 6.5%YoY in Nov’18 which was below market expectations as prices of perishable food items saw a steep decline. Moreover, Pakistan’s outstanding foreign debt and liabilities rose by 13%YoY in 1QFY19 to USD96.7bn, as compared to USD85.6bn in SPLY. Furthermore, Federal Board of Revenue (FBR) has to collect an enormous amount of PKR586bn in the current month to meets its half yearly tax collection target of PKR1.96tn.
Outlook
Soaring twin deficits and depreciation of PKR against USD due to depleting forex reserves have cornered Pakistan with likelihood of another IMF bailout seeming more apparent. While Pakistan has formerly rejected IMF conditions for the package, further delay will only dampen the sentiments of the investors. Moreover, the clock is ticking on the implementation of 27 actionable plans of FATF that Pakistan has to comply by Dec 15, 2018, which if Pakistan fails to achieve may have serious ramifications for the economy.
News This Week
Economic highlights & Data points
Forex reserves drop to USD14bn (The News): Pakistan’s foreign exchange reserves fell nearly 4%WoW to USD14bn during the week ended November 30, the central bank said on Thursday.
SBP hikes interest rate to 10% on inflation fears (The News): State Bank of Pakistan on Friday hiked key interest rates by 150bps to 10% and sharply cut growth forecasts, warning that the economy faces mounting headwinds from rising inflation and high current account and fiscal deficits.
Consumer inflation clocks in at 6.5% in November (The News): Annual consumer price inflation clocked in at 6.5% for November, which remained below the market consensus and the last month reading, as perishable food prices tumbled during the month, official data showed on Tuesday.
FBR needs to collect PKR586bn more in Dec’18 (The Nation): The Federal Board of Revenue (FBR) will have to collect mammoth PKR586bn in current month (December) to meet the tax collection target of PKR1.96tn set for the first half (July to December) of ongoing fiscal year (FY19).
Foreign debt up 13%YoY in July-Sept to USD96.7bn (The News): Pakistan’s outstanding foreign debt and liabilities rose 13%YoY in the first quarter of the FY19 fiscal year to USD96.7bn, the central bank data showed on Tuesday. The external debt and liabilities (EDL) came at USD85.6bn at the end of September last year.
[ads1]
Sector and Corporate highlights
Cabinet approves PKR25.7bn gas subsidy for exporters (Dawn): Two months after the supplementary budget 2018-19, the federal cabinet on Thursday approved another PKR25.7bn ‘supplementary grant’ to provide subsidized gas to five zero-rated export sectors in Punjab.
Government allows furnace oil export (The News): Government has allowed export of furnace oil and decided to stop the fuel import in a bid to help oil refineries ease their surplus that threatened to break down petroleum supply chain.
48 Punjab sugar mills agree to start cane crushing (BR): 48 sugar mills of Punjab have agreed to start much delayed sugarcane crushing season 2018-19 following an understanding between the government and sugar mills association Punjab chapter.
Cement sales fall 7.1%YoY on construction slowdown (The News): Cement sales fell 7.1%YoY to 3.3mn MT in November as its demand decreased on slowdown in construction and development activities, industry data showed on Tuesday.
Auto sector assured of continuity of current ADP (BR): Ministry of Industries and Production (MoI&P) on Monday assured the auto sector that the current Auto Development Policy (ADP) 2016-21 will continue to be implemented and it does not allow granting Greenfield status to any existing company.
Honda jacks up bike prices for sixth time (Dawn): Atlas Honda Ltd (AHL) has increased the prices of bikes for the sixth time this year by PKR2,600-8,000 from Dec 1.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | Change | |
| Mkt. Cap (US $ bn) | 58.0 | 56.0 | -3.4% |
| Avg. Dly T/O (mn. shares) | 152.0 | 163.3 | 7.5% |
| Avg. Dly T/V (US$ mn.) | 71.2 | 58.1 | -18.3% |
| No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
| KSE 100 Index | 40,496.0 | 38,562.1 | -4.8% |
| KSE ALL Share Index | 29,381.7 | 28,331.5 | -3.6% |