Index started the week with the much anticipated correction but staged a recovery towards the latter half of the week as some positive stimulus provided the support. KSE-100 closed the week at 49,365pts with a marginal WoW increase of 0.3%. Foreign Institutions Portfolio investment (FIPI) registered net outflow of US$46.6mn. Average volume traded decreased by 20.5% WoW while average value traded decreased by 2.3% WoW.
After remaining in red for the first two days, index recovered from the correction on the back of some sector specific positive news’. The index was supported by positive news on potential continuation of fertilizer subsidy, which should have positive implications on sectors’ driven by improved farm level income including fertilizer and consumers. Imposition of anti-dumping duty by National Tariff Commission (NTC) on import of cold rolled coils from China and Ukarine was a positive stimuli for the cold rolled players following which ISL and ASL closed last two sessions on their upper circuits. Similarly, the duty on import of cotton from India of 55.5 or more counts, spurred up the activity in the textile sector as NTC imposed PRs26.89-55.8/kg duty. Moreover, during the week, successful book building process of Roshan Packages took place which was oversubscribed by 6.83x. Results of some big scrips like PPL and MARI came out during the week where a dismal performance by PPL for FY16 dragged the price down while on the other hand, market reacted positively on MARI’s result. Commissioning of Cherat Cement’s plant was taken positively by the market and the stock closed near its daily upper limit. Overall, most of the activity during the week was witnessed in the medium-tier stocks.
On the macro front, FDI growth in Pakistan turned positive in Dec-16 with inflows of US$595mn, up 328% from US$13mn in the same month of the previous year. Current account deficit (CAD) widened by 92% YoY in 1HFY17, standing at US$3.59bn compared to US$1.87bn in the same period last year.
The start of result season will keep the activity on the higher side as the result of some big scrips like LUCK, ATRL, NRL are to be rolled out next week. Moreover, eyes will also be set on the final decision of revision of subsidy on fertilizer. However, we advise investors to be cautious given the proceedings over Panama Leaks case move forward as the situation seems to be heating up. Our top picks are PPL, OGDC, UBL, EFERT, BAFL, INDU, PSO, PIOC, MUGHAL and DGKC.
NEWS THIS WEEK
ECONOMIC INDICATORS & DATA POINTS
FDI UP MASSIVE 328% (TRIBUNE): FDI growth in Pakistan turned positive in Dec-16 with inflows of US$595mn, up 328% from US$13mn in the same month of the previous year. The massive increase in FDI can be attributed to EFOODS transaction.
WORLD BANK, AIIB TO GIVE $720MN FOR PROJECTS (TRIBUNE): Pakistan, the World Bank and the Asian Infrastructure Investment Bank have inked loan and grant agreements worth US$720mn. Of the US$720mn assistance, US$690 million will go to the 1,410-megawatt Tarbela 5th Extension Hydroelectric Power Project.
CURRENT ACCOUNT DEFICIT WIDENS 92% (TRIBUNE): Current account deficit (CAD) widened by 92% YoY in 1HFY17, standing at US$3.59bn compared to US$1.87bn in the same period last year.
HOME LOANS GROW FOR 11TH QUARTER IN A ROW (DAWN): Housing finance grew by 13.5% YoY during Sep-16. However, non-performing loans within the housing sector decreased 20% YoY to PRs11.3bn.
SECTOR AND CORPORATE HIGHLIGHTS
SUBSIDY ON FERTILIZER RESTORED (BR): Prime Minister directed continuation of the provision of subsidy on fertilizers to benefit farmers.
FAUJI MEAT OFFICIALLY BEGINS COMMERCIAL OPERATIONS (TRIBUNE): Fauji Meat Limited officially commenced commercial operations of its meat processing and export business on Monday.
DAR REFUSES TO CUT PRICE OF IMPORTED UREA (THE NEWS): Finance Minister has refused to consider a proposal for reduction in price of imported urea from PRs1,200/bag to PRs1,000/bag to sell out the surplus stock and stated that price reduction is not a solution.
MINISTRY PROPOSES EXPORT OF UREA (RECORDER): Ministry of Commerce has proposed the export of 0.3 mn tons of urea. However, National Fertilizer Development Centre has proposed that subsidy of approx. PRs570/bag provided as feedstock to the urea plants and may be recovered from exporters
ARIF HABIB GROUP TO INVEST PRS25BN IN NEW CEMENT PLANT (TRIBUNE): Arif Habib Group is going to invest PRs25bn (or US$235mn) in a new cement plant that will be completed in the next two years. The new plant will take installed capacity of Power Cement to 3.37mn tons from its current capacity of just 0.9mn tons.
USED CAR IMPORTS CLAIM BIGGER CHUNK IN AUTO SALES (DAWN): Reportedly, the share of used cars and light commercial vehicles (LCVs) in the auto market was 19% in 2016, up from 14% in 2013. In 2016, the import of used vehicles stood at 46,500units as compared to 43,400 units last year.
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