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Stock market at a glance

Market Review

The benchmark index witnessed a volatile week where KSE100 decreased to 41,050pts, posting a marginal decline of 0.5%WoW. The market remained bearish on account of pending decisions regarding the gas and power tariff hikes. However, impressive recovery was observed on Thursday as investor sentiments improved on the back of expected decisions of the cabinet meeting to address the worsening macroeconomic indicators. During the week, market participation remained lackluster as evident from ADT and ADTV that declined by 10%WoW and 1%WoW, respectively. Foreign individuals remained net seller in this week as well, exhibiting an outflow of USD18.6mn.

During the week, the Economic Coordination Committee (ECC) approved import of 100k tons of urea at a subsidy of PKR960/bag and decided to resume gas supply to two closed fertilizer units which will increase production capacity of urea by 79k tons/month. In addition to this, PAMA released automobile sales figures for Aug’18 which declined by 20%YoY compared to SPLY on the back of a fall in sales of low-priced vehicles which included Mehran and Ravi. Also, Pak Suzuki Motor announced that it would cease production of its Mehran from next year in a move to launch new brand with modern features amid impending competition from Chinese brands.

On the macro front, total foreign exchange reserves declined to USD16.1bn, down by 1.8%WoW, owing to external debt repayments. Pakistan’s trade deficit shrank to USD6.2bn in 2MFY19 as the pace of growth in exports beat the increase in imports, indicating government’s administrative measures have started yielding results. On the other hand, remittances from overseas Pakistani workers increased by 13.5%YoY in 2MFY19; remittances stood at USD3.9bn in 2MFY19, compared with USD3.4bn in SPLY.

Outlook

As the government is set to announce a mini budget by next week, we believe that clarity on different economic policies would dictate the direction of the market.

News This Week

Economic highlights & Data points

Forex reserves fall to USD16.1bn (The News): Pakistan’s foreign exchange reserves fell 1.83% to USD16.1bn as of September 7, the central bank said on Thursday. The forex reserves held by the State Bank of Pakistan amounted to USD9.6bn, down USD261mn, compared with the preceding week.

Govt deficit plan aims to cut entitlements (Tribune): The government has postponed the National Assembly session that it had convened to present mini-budget till next week, amid plans to withdraw tax free privileges being availed by the president, governors and federal ministers.

Exports of services fall (Dawn): The export of services shrank by 1.4% to USD405mn in the first month of this fiscal year, the Pakistan Bureau of Statistics said on Wednesday.

Trade deficit shrinks as exports grow faster than imports (Tribune): Pakistan’s trade deficit shrank to USD6.2bn in 2MFY19 as the pace of growth in exports beat the increase in imports, indicating government’s administrative measures have started yielding results.

Remittances up 13.45% to USD3.9bn in July-August (The News): Remittances from overseas Pakistani workers rose 13.45% in the first two months of the current fiscal year, the central bank data showed on Monday, with most of the increase coming from the United States and the United Kingdom. Remittances stood at USD3.9bn in July-August FY19, compared with USD3.4bn in the corresponding period last year.

 

Sector and Corporate highlights

Move to cut development funds by over PKR250bn (Dawn): While protecting the China-Pakistan Economic Corridor (CPEC) and other strategic development projects, the Pakistan Tehreek-i-Insaf government is working on scaling down federal development program to about PKR775bn from PKR1,030bn set in the budget 2018-19.

Auto sales drop 20% in Aug as low-priced cars lost some appeal (Tribune): Auto sales declined 20% in Aug’18 compared to the same period of previous year, which came on the back of a steep fall in sales of low-priced vehicles which included Pak Suzuki Motor’s Mehran and Ravi.

Govt plans to cut PSDP by PKR380bn, shelves 400 unapproved schemes (The News): The government is planning to abolish over 400 unapproved schemes, and also slash the current fiscal year’s Public Sector Development Program (PSDP) to PKR600-PKR650bn from PKR1,030bn, sources said on Tuesday.

ECC allows 100,000 tons urea import to bridge shortfall in rabi season (The News): The Economic Coordination Committee (ECC) of the cabinet on Monday allowed 100,000 tons of urea import and decided to restore gas supply to two closed fertilizer plants to resume production. The ECC took the decisions at a meeting presided by Finance Minister Asad Umar. The government decided to immediately make two local fertilizer plants operational, which will produce 79,000 tons/month. It also allowed 100,000 tons of urea import through the Trading Corporation of Pakistan.

Power sector receivables soar to PKR891bn (BR): The financial position of power sector deteriorated and circular debt increased during the previous government’s tenure from 2013-18 subsequent to a steady rise in receivables against federal and provincial governments, private sector, agriculture tubewells in Balochistan, AJK and Fata. Concurrently, power sector’s payables to the power producers and gas and oil companies have also soared.

Stock Market Synopsis
Last week This Week %Change
Mkt. Cap (US $ bn) 69.1 68.4 -1.0%
Avg. Dly T/O (mn. shares) 146.4 131.8 -10.0%
Avg. Dly T/O (US$ mn.) 43.2 42.8 -1.0%
No. of Trading Sessions 5.0 5.0 0.0
KSE 100 Index 41,266.4 41,049.9 -0.5%
KSE ALL Share Index 30,288.7 30,038.3 -0.8%

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