Index started the week on a positive note and crossed 50,000pts on several occasions, however it could not retain this level as profit taking pushed the index down to close the week below 50,000pts. KSE-100 closed the week at 49,963.8pts with a WoW increase of 1.2%. Foreign Institutions Portfolio investment (FIPI) registered net outflow of US$13.6mn. Average volume traded increased massively by 34.7% WoW with average value traded by 16.1% WoW.
Apart from the opening day, the week remained range-bound as the market continued to absorb different sector specific news. ECC’s decision to approve fertilizer subsidy along with export of 0.3mn tons urea fertilizer created hopes that industry’s urea inventory levels might reduce. Cherat Cement announced another expansion that would increase company’s cement capacity to around 4.5mn tons. During the week, government signed an implementation and power-purchase agreements for setting up of two coal-based power projects in Hub and Thar with a cumulative generation capacity of 1,650MW. Following this news, improved activity was witnessed in HUBC to end the week up 8%. Results of some big scrips in cement, auto assemblers and oil sector came out during the week and were largely in line with market expectations. Overall, most of the activity during the week was witnessed in the medium-tier stocks.
On the macro front, development spending slowed down as the government disbursed less than 39% of the allocated amount of PRs800bn for Public Sector Development Program (PSDP) in the first seven month of this fiscal year. Repatriation of profits and dividends on foreign investment rose to US$951mn in 1HFY17.
As the result season continues, market activity can be expected to remain on the higher side as the result of some big scrips like FFC, FFBL & EFOODS are likely to attract investors attention. Moreover, eyes will also be set on the decision of the monetary policy committee which is set to meet on 28th Jan, 2017. While we expect policy rates to remain unchanged, a 25bps cut would prove to be a positive surprise for the market. However, as political situation in the country continues to heat up on the back of Panama Leaks proceedings, we advise investors to be cautious. Our top picks are PPL, OGDC, UBL, EFERT, BAFL, INDU, PSO, PIOC, MUGHAL and DGKC.
NEWS THIS WEEK
ECONOMIC INDICATORS & DATA POINTS
OGRA GRANTS 21LICENSES FOR OMCS (BR): Oil and Gas Regulatory Authority (OGRA) has granted 21 licenses for establishment of Oil Marketing Companies during 1HFY17. Hi-Tech Lubricants was among the 21 companies along with several others.
WAPDA CANCELS PRS5.4BN CONTRACTS FOR DASU PROJECT (DAWN): The Wapda has terminated two of its key contracts with the Chinese firm, citing ‘fundamental breaches’ of the agreement.
GROWTH IN HOUSING FINANCE SLOWS DOWN SHARPLY (TRIBUNE): New tax measures to generate more tax revenue from real estate sector have dented the interest of borrowers in acquiring housing finance.
DEVELOPMENT SPENDING SLOWS DOWN TO 32% OF ALLOCATION (DAWN): The government disbursed less than 39% funds, about PRs312bn, for the overall Public Sector Development Program (PSDP) in the first seven month of this fiscal year against the allocation of PRs800bn.
US$951MN REPATRIATED IN JULY-DECEMBER (DAWN): The repatriation of profits and dividends on foreign investment rose to US$951mn in 1HFY17. The highest amount was repatriated by financial businesses (banking) amounting to US$180mn.
SBP’S RESERVES RISE 0.12%, STAND AT US$18.383BN (TRIBUNE): Foreign exchange reserves held by the SBP increased by 0.12% WoW to US$18,383.5mn. Total liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $23,246.2 million.
SECTOR AND CORPORATE HIGHLIGHTS
PRS1.78/UNIT CUT APPROVED FOR JAN-17 (DAWN): Under the monthly fuel price adjustment, PRs1.86/unit cut has been decided for the current month by National Electric Power Regulatory Authority (NEPRA).
CHERAT CEMENT ANNOUNCES ANOTHER EXPANSION PLAN (TRIBUNE): Cherat Cement on Monday announced it would install a third cement production line at its existing site of 2.1mn tons/annum, taking the company’s total output to 4.5mn tons/annum.
ECC ALLOWS 0.3MN TONS OF UREA EXPORT (TRIBUNE): The government on Monday allowed the export of 300,000 tons of urea fertilizer till April 28, 2017 without any subsidy.
BANK LOANS GREW 144% IN 2016 (DAWN): Banks increased their advances 144% YoY in 2016. The overall increase in advances over the 12- month period was Rs790 billion compared to the rise of Rs323bn a year ago.
GOVT RESTORES HUB COAL POWER PROJECT CAPACITY (DAWN): The government signed an implementation and power-purchase agreements with two Chinese and local companies for setting up of two coal-based power projects in Hub and Thar with a cumulative generation capacity of 1,650MW.
ABRAAJ GROUP ACQUIRES MAJORITY STAKE IN JHIMPIR POWER (TRIBUNE): In a statement released from Dubai, Abraaj Group has announced that it has entered in a definitive agreement to purchase a majority stake in Jhimpir Power Limited from Burj Capital.
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