The benchmark index witnessed negative sessions throughout the week where KSE100 declined to 41,266pts posting a decrease of 1.4%WoW on the back of PM’s approval to increase gas price by 46% and deteriorating macroeconomic indicators. During the week, market participation remained lackluster as evident from ADT and ADTV that declined by 13.2%WoW and 24%WoW, respectively. Foreign individuals remained net seller in this week as well, exhibiting an outflow of USD9.0mn.
During the week, the Economic Coordination Committee (ECC) approved an increase of PKR2.0/unit increase in electricity price and disconnections in case of failure to pay bills for 3 consecutive months. In addition to this, ECC decided to resume operations of 3 fertilizer plants by providing subsidized RLNG to address the issue of urea shortage for a period of 4 months commencing from Sep’18. Furthermore, ECC decided that it would introduce prepaid meters to curb electricity theft. Moreover, oil sales for Aug’18 clocked in at 1.4mn MT, down by 46%YoY, mainly due to steep decline of 79%YoY in FO sales. Lastly, cement dispatches for Aug’18 clocked in at 3.5mn MT as against 3.8mn MT in Aug’17, down by 8%YoY.
On the macro front, foreign exchange reserves of central bank declined to USD9.9bn, down by USD342mn, owing to external debt repayments. Additionally, the state bank plans to raise PKR5.2trn through MTBs and PIBs to finance the budget deficit. Additionally, the financial assistance from China was the highest in Jul’18 that stood at USD289mn out of the total loans of USD468mn. Furthermore, CPI for the month of Aug’18 clocked in at 5.8%YoY on the back of rise in oil prices and USDPKR depreciation.
We expect that any economic decision to tackle the growing macroeconomic challenges by the government and clarity on seeking IMF bailout package would dictate the direction of market. Moreover, investors would keep track of the decisions of ECC with respect to gas price hike and settlement of circular debt in the next week’s meeting.
News This Week
Economic highlights & Data points
Forex reserves decline to USD16.37bn| (The News): Pakistan’s foreign exchange reserves fell 1.89% to USD16.37bn as of August 31, the central bank said on Thursday. The foreign reserves stood at USD16.69bn in the previous week. The forex reserves held by the State Bank of Pakistan amounted to USD9.89bn, down USD342mn, compared with the preceding week.
SBP to raise PKR5.15trn through MTBs, PIBs in three months| (The News): The central bank will auction PKR5.15trn worth of Market Treasury Bills (MTBs and Pakistan Investment Bonds (PIBs) in September-November 2018 to help the government finance the budget deficit, the State Bank of Pakistan said on Thursday. The SBP would sell PKR4.85trn of three, six, and 12 months debt through t-bills. The central bank also plans to offer PKR150bn worth of three-, five-, 10 and 20-year PIBs, according to tenor-wise targets of PIBs.
China emerges biggest lender with USD289mn financing in July| (The News): China emerged as the biggest lender for Pakistan in July, extending financial assistance at USD289mn out of the total USD468mn in loans and grants received from various bilateral and multilateral creditors during the month, official data revealed on Wednesday.
Inflation rises to 45-month high| (Nation): Inflation rate touched 5.84% during August 2018, highest in last 45 months, mainly due to increase in petroleum products prices. Inflation is on the rise since last three months due to the impact of rupee depreciation and increase in oil prices. However, inflation may ease down in ongoing month due to recent decline in oil prices.
Sector and Corporate highlights
Electricity price increased by PKR2 per unit| (The News): The Economic Coordination Committee (ECC) of the Cabinet, headed by Minister for Finance Asad Umar, on Monday announced to conduct a major crackdown on electricity theft after approving an increase in electricity price by PKR2 per unit. The meeting agreed that electricity meters of those persons, departments and ministries or any private entity will be disconnected if they fail to pay their bills for consecutive three months.
ECC undecided on how to tackle circular debt| (Tribune): Members of the Economic Coordination Committee (ECC) on Monday failed to evolve a mechanism to deal with the recurring circular debt, currently amounting to nearly PKR600bn ahead of another spike in electricity prices that are set to rise by 33%, likely to deepen the sector’s woes.
Monthly oil sales plunge to seven-year low | (Dawn): The country’s oil sales touched a seven-year low to 1.35mn tonnes in August, down by 46% YOY. Similarly, during the first two months of this fiscal year the sales also fell by 38% to 3.0mn tonnes.
Cement sales fall 5.31% in July-Aug| (The News): The changeover in government likely impacted domestic cement sales, which unexpectedly declined by 5.31% in the 2MFY19, an official of the All Pakistan Cement Manufacturers’ Association (APCMA) said on Wednesday.
|Stock Market Synopsis|
|Last week||This Week||%Change|
|Mkt. Cap (US $ bn)||69.9||69.1||-1.1%|
|Avg. Dly T/O (mn. shares)||168.7||146.4||-13.2%|
|Avg. Dly T/O (US$ mn.)||56.9||43.2||-24.0%|
|No. of Trading Sessions||5.0||5.0||0.0|
|KSE 100 Index||41,863.5||41,266.4||-1.4%|
|KSE ALL Share Index||30,645.1||30,288.7||-1.2%|