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STOCKS RECOUP LOSSES, MUTUAL FUNDS AND INDIVIDUALS TO RAISE PARTICIPATION LEVELS

During the week ended 10th November 2017, Pakistan Stock Exchange (PSX) recouped some of lost ground and the benchmark index inched higher to close at 41,436 points. The expectations about strong automotive sales kept OEMs in the limelight, whereas upward momentum in crude oil prices kept refiners under pressure. On the geopolitical front, the developing situation in Saudi Arabia raised concerns about an already unstable region. News flows during the week included: 1) OGRA proposing to float bids for building a 430km long oil pipeline from Sheikhupura to Peshawar, 2) ENGRO announcing to establish its second LNG terminal of 600mmcfd, scheduled to become operational by early 2019 with consortium partners Shell exploration BV, Fatima Group, and Swiss based Gunvor Group, 3) cement manufacturers witnessing highest ever capacity utilization of 93% during first quarter of the current fiscal years, 4) World Bank raising alarms about Pakistan’s economy and predicting that the higher inflation number for the FY18‐19 would rise to 6 percent and 5) SBP data indicating country’s total foreign exchange reserves surging to US$19.91billion during the week ended 3rd November 2017. Volume leaders of the week were: PAEL, JPGL, SSGC, ANL and SNGPL. Major gainers were: HASCOL, NML, ABL, PSMC and ASTL. The laggards included: NCL, FATIMA, PTC, UBL and FFBL. Foreign participation witnessed further decline with net selling of US$1.78million as compared to US$30.73million a week ago. With MSCI semi‐annual review due on 13th November 2017; Banks, Cements and E&P sectors are expected to witness increased trading activity. Approaching the year‐end, analysts expect mutual funds and individuals to raise participation levels, re‐aligning portfolios for the next year.

In these pages it has been highlighted repeatedly that the country is inching towards balance of payment crisis. The positive points are that remittances are on the rise and country’s liquid foreign exchange reserves are on the rise. Reportedly, overseas Pakistani workers have remitted US$6,444.46 million during the first four months (July to October) of FY18, as compared to US$6,301.39 million sent during the same period in the preceding year. During October 2017, the inflow of worker’s remittances was reported at US$1,654.45 million, which was 27.87% higher as compared to September 2017 and 5.99% higher than October 2016. The countries contributing major share included Saudi Arabia, UAE, USA, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU member countries.

Another positive news was that during the week ended 3rd November 2017, the total liquid foreign reserves held by the country were reported at US$19,912.1 million. The reserves held by State Bank of Pakistan (SBP) increased by US$14 million to US$13,861 million. The net foreign reserves held by commercial banks were reported at US$6,050.9/ million.

The data made available by Securities and Exchange Commission of Pakistan (SECP) revealed that foreign investment in the stock market has registered a net outflow of more than US$652 million during 2016-17, which reflects a decline of 154 percent as compared to year ago. According to the SECP report, the bourse witnessed a significant and steady rise in the stock market indices with historic and unprecedented levels being reached. The index began the year at 37,966.76 points and reached 46,565.29 on 30th June 2017, an increase of almost 23% since the beginning of the year. The index touched its lowest level of 37,966.76 on 4th July 2016 and reached its highest level of 52,876.46 on 24t May, 2017. Average daily turnover of over 350 million shares was recorded for the period for FY17. A total of 560 companies with a paid-up capital of Rs1,317.220 billion were listed at the exchange.

Pakistan Oil Fields (POL) has announced that MOL, operator of Tal Block, had discovered oil and gas reserves in development well Makori East-06 (Tal Block). According to a notice sent to Pakistan Stock Exchange (PSX) by the company, MOL (operator of Tal Block) discovered oil and gas reserves in development well Makori East-06 (Tal Block) to the tune of 4.63 mmcfd of gas and 1,817 barrels of oil per day (bpd) of condensate. The drill stem test (DST) indicated the potential of Hungu and Lumshiwal formations with the well showing potential to produce 1,817 bpy and 4.63 mmcfd of gas. Production from the well is expected to start from February 2018 while gas production from the well will be priced under Petroleum Policy 2012.

Bank of China (BoC) has formally commenced its operations in Pakistan, with the official launch performed by President Mamnoon Hussain at Aiwan-e-Sadr. Addressing the launch ceremony, President Hussain said the bank would play an important role in providing the required resources for promoting commercial activities and developing infrastructure. He said this development would lead to further improvement in national growth rate, and people — particularly the business community — would be able to effectively assist in making business environment more conducive. The opening of BoC indicates the benefits of the China-Pakistan Economic Corridor (CPEC) project, which transformed from a dream into reality in the last few years.

The oil marketing companies’ (OMCs) sales for October 2017 registered an increase of 5% to 2.5 million tons, slightly lower than the market expectations. Mogas (motor gasoline or commonly known as petrol) sales went up 9%, while the sales of high speed diesel (HSD), which is more sensitive to oil prices changes, increased 2% percent recently. On the other hand, Hascol Petroleum (HASCOL) and Attock Petroleum (APL) outperformed the market growing by 65% and 20%, respectively. While sales of Pakistan State Oil (PSO) remained flat, Shell Pakistan (SHEL) posted decline in sales by 33%. It must be mentioned here that the Government of Pakistan has announced increase in petrol and diesel prices by 3%.

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