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INDEX POSTS NOTABLE DECLINE AS BEARISHNESS PERSISTS OVER SHABBY ECONOMIC SCENE

The growing concerns about the health of the economy became even a bigger concern as compared to the prevailing strangulated relations between the civil and military. During the week ended 13th October, the benchmark Index of Pakistan Stock Exchange (PSX) posted a decline of 1,466 points or 3.55%WoW to close at 39,847 levels. This is the first time after June 2, 2017 that the benchmark index ended all the five trading days in the negative zone. Average daily trading volume increased by 4.96%WoW to 145.79 million shares. The top volume leaders were: KEL, TRG, ANL, CWSM and BOP.

Key news flows impacting the market included: 1) NEPRA announcing its decision regarding K-Electric on approving 5% increase in previously announced tariff to Rs12.77/KwH against the company’s demand of Rs16.1/KwH; 2) ECC approving the rise in margins of petroleum products, deregulation of HSD and renewal of textile package with 50% of rebates to be offered without any condition; 3) fiscal deficit narrowing to 0.9% of GDP in 1QFY18 as compared to 1.35% of GDP during corresponding period of last financial year; 4) World Bank reiterating its concerns over the external sector of Pakistan and 5) sales of cars and light commercial vehicles (LCVs), jeeps and vans increasing 27%YoY to 60,469 units in 1QFY18.

Major gainers during the week included: POL, INDU, PPL and 4) BAFL, while the major losers included: MLCF, PIOC, ASTL, GWLC, KEL and ABL. Foreigners’ interest in the market grew significantly with an inflow of US$38.9 million, beating its previous highest weekly net accumulation of US$27.7 million since the beginning of FY18. While political volatility is likely to continue during the next week, analysts expect investors to pay more attention towards the result season where ISL, DGKC, SHEL, KAPCO, UBL and Attock group companies are set to announce their quarterly results.

In these pages it has been highlighted repeatedly that Pakistan is inching towards serious balance of payment crisis and very shortly it will have no option but to approach the lender of last resort, International Monetary Fund (IMF). Country’s foreign exchange are depleting due the rising external debt servicing, export proceeds proving too paltry to finance growing import of energy products and declining remittances. According to the data released by State Bank of Pakistan (SBP), overseas Pakistani workers remitted US$4,790.01 million during the first quarter of FY18 as compared to US$4,740.37 million for the corresponding period of the preceding year. During September 2017, the inflow of worker’s remittances amounted to US$1,293.88 million that was 33.79% lower than August 2017 and 19.75% lower than September 2016. This decline can be attributed to the shrinking job opportunities in the Middle East. However, certain quarters hold growing use of ‘Hundi System’ for the decline in remittances through the banking channel.

 

In an attempt to boost exports, the SBP announced to extend the subsidy on export of wheat and its products up to 30th October 2017. According to SBP, the Economic Co-ordination Committee (ECC) of the Cabinet has approved extension in processing period of export of wheat/wheat products, subject to the stipulated term and conditions. Accordingly, it is advised that subsidy on export of wheat/wheat products shall be provided to those exporters who have lifted the wheat from warehouses of Food Departments of respective provincial governments during the period August 19, 2016 to March 15, 2017. Reportedly, the country has around 9 million tons wheat, but analysts warn that Pakistan is incapable of competing in the global markets because of high input costs due to poor yield and huge post harvest losses.

The central bank has strongly reacted over the decision of the National Accountability Bureau (NAB)to investigate its officials for alleged misuse of authority in terms of amalgamation of KASB Bank into BankIslami. The NAB decision was termed disappointing since the inquiry report did not incorporate all the details provided by SBP. The central bank had decided to amalgamate KASB Bank into BankIslami in 2015 after a moratorium was imposed by the federal government. “Such one-sided views lead to misjudgment about the authority of SBP as a guardian of the financial sector in general and the interest of depositors in particular. Further, it negatively impacts the motivation of SBP staff to discharge its duties without fear or favor,” said a press release issued by the central bank.

According to a report by Pakistan Petroleum Information Service (PPIS), country’s hydrocarbon production inched up by 2.0% in August 2017. Oil production was reported at about 89,000 barrels per day (bpd), while gas output exceeded 4 billion cubic feet per day (bcfd). Analysts attributed the increased production to higher output from Mari, Nashpa, Kandhkot, and Sharf and additional flows from new discovery in Mardankhel. Output of Oil and Gas Development Company (OGDC) grew by 4.0% in August 2017, led by 6.0% growth in both oil and gas production.

Pakistan Telecommunication Company Limited (PTCL) announced financial results for nine-months ended 30th September 2017, posting profit after tax at Rs6.49 billion (EPS: Rs1.27) as compared to net profit of Rs7.60 billion (EPS: Rs1.49) for the corresponding period of the previous year. The telecom operator explained in a press statement that the net profit, after being adjusted for one-offs, reduced by 7% over the same period last year, mainly due to revenue decline and lower financial income. The company earned Rs52.8 billion topline as against Rs54.3 billion for the corresponding period last year. The telecom company stated that its overall revenue of nine months was down by 3% over the same period last year due to continued decrease in Voice and EVO revenues, which could not be offset by growth in other segments.

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