The index traded sideways closing the week flat at 49,210 points. Broadly, market saw a cautious stance by the investors amid political uncertainty and heavy foreign selling. Foreign Institutions Portfolio investment (FIPI) registered net outflow of US$46.2mn. Average volume traded increased by 19.7% WoW while average value traded increased by 6.6% WoW.
Index started the week on a dull note with textile sector as an exception as investors took bets on much anticipated export relief package to be announced by the Prime Minister. The announcement of PRs132bn on Tuesday provided further conviction throughout the week. Engineering sector continued its winning streak on the back of increasing demand as government signed financial close of 870 MW Suki Kinari hydropower project. On standalone basis, Mughal announced the commencement of two melting furnaces of 96,000 MT combined capacity from January 2017, leading the stock to post 13.8 % return over the week. Similarly, Hub Power Company Limited (HUBC) was also among the investors’ favorites, after they decided to increase their stake in the joint venture with China Power from 26% to 47.5%. On the flip side, fertilizer sector saw heavy selling as government discontinued fertilizer subsidy as the allocation of PRs27bn subsidy has been exhausted.
On the macro front, World Bank revised Pakistan’s growth rate upward to 5.2% for FY17 and 5.5% for FY18 from 5% and 5.4% respectively. Additionally, Pakistan’s trade deficit widened to US$14.5bn during 1HFY17 due to steep decline in exports and growing imports.
We believe the earnings season, set to start next week, should set the mood going forward. For now, Panama case hearing seems to be the only concern for the market in the near term as the hearing is getting close to its conclusion. Our top picks are PPL, OGDC, UBL, EFERT, BAFL, INDU, PSO, PIOC, MUGHAL and DGKC.
NEWS THIS WEEK
ECONOMIC INDICATORS & DATA POINTS
Service exports rise for second month (Dawn): Service exports grew for the second consecutive month in November, rising by nearly 27% YoY to US$400.8mn.
World Bank revises Pakistan’s growth rate upwards to 5.2% in FY17 (Tribune): World Bank has revised Pakistan’s growth rate upwards to 5.2% for FY17 and 5.5% for FY18.
LSM grew by 3.24% YoY for 5MFY17 (Dawn): According to the latest data released by Pakistan Bureau of Statistics (PBS), large-scale manufacturing grew by 8%YoY/4.75%MoM for Nov-16.
Pakistan’s total foreign liquid reserves amount to US$23.2bn (Dawn): As of 6-Jan-17, Pakistan’s total foreign liquid reserves stood at US$23.2bn, up 0.16% WoW. SBP’s reserves increased by US$41mn to US$18.3bn.
Trade deficit widen to US$14.5bn, December exports fall again (Tribune): Pakistan’s trade deficit widened 22.2% or US$14.5bn during the first half fiscal year due to a steep decline in exports and double digit growth in imports.
Remittances decline by 2.27% (Tribune): Overseas Pakistanis sent remittances amounting to US$9.46bn in 1HFY17, down 2.27% compared with US$9.68bn the country received during the same period in the preceding year.
SECTOR AND CORPORATE HIGHLIGHTS
K-P govt shuts down one of Lucky Cement’s Pezu plant (Tribune): Provincial government of K-P says it has shut down Plant B (one of four plants) of Lucky cement from January 1 due to non-compliance with prescribed environmental standards.
Govt focusing on improving transmission line (Tribune): According to news report, the government is following a comprehensive strategy to reinforce the existing gas transmission network. An amount of PRs71bn will be spent on upgrade of SNGP and SSGC transmission network across the country.
Funds arranged for Suki Kinari hydroelectric power project (Tribune): The financial close agreement for the 870MW Suki Kinari hydroelectric project has been achieved on Monday and work on it will start in next two to three months.
Incentive package announced to encourage exports (BR): The much-awaited export incentive package has been announced by Prime Minister, Mr Nawaz Sharif. Total package is of PRs180bn where the custom duty and sales tax on import of cotton, sales tax on import of textile machinery and custom duty on import of man-made fiber (except polyester) have been removed.
Ministry proposes more subsidies for imported urea (Tribune): Ministry of industries is lobbying the ECC to slash the price of imported urea to PRs1000/bag.
HUBCO increases stake to 47.5% in imported coal-fired project (Tribune): Hubco has increased its stake to 47.5% from 26% in the joint venture of setting up a 1,320 MW power project on imported coal at an estimated cost of over US$2bn at Hub, Balochistan.
Punjab requested to continue subsidy for fertilizer (Dawn): Minister for National Food Security and Research Sikandar Hayat Bosan told the Senate that a request has been received from the Punjab government to continue subsidy on fertilizer.
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