The benchmark index witnessed a volatile week where KSE100 decreased to 40,852pts, posting a decline of 1.1%WoW. The market remained bearish on account of lack of clarity regarding decision making on economic policies. During the week, market participation remained lackluster as evident from ADT and ADTV which declined by 24%WoW and 26%WoW, respectively. Foreign individuals remained net seller in this week, exhibiting an outflow of USD8.2mn.
During the week, Economic Coordination Committee (ECC) deferred the decision to increase electricity tariff by PKR3.40/kwh (based on NEPRA recommendation) until its next meeting. On the other hand, Oil and Gas Regulatory Authority (Ogra) increased wellhead gas prices of 23 fields with effect from Jul’18. With regard to the gas price hike, All Pakistan Ceramic Tiles Manufacturers Association (APCTMA) has urged the government to withdraw increase in gas prices for tile manufacturers as it would make locally produced tiles uncompetitive in local and global markets. In addition to this, total exports proceeds from the textile and clothing sector jumped 7.3% to USD1.3bn in Aug’18 from USD1.2bn in the corresponding period last year.
On the macro front, total foreign exchange reserves declined by USD279mn during the week to USD15.8bn owing to external debt servicing. Moreover, Pakistan’s current account deficit widened by 10%YoY to USD2.7bn in 2MFY19 as compared to USD2.5bn SPLY. Although some relief was felt on the external front as remittances grew 13%YoY to USD4bn, it was largely offset by trade deficit which rose to USD6.6bn. Additionally, Asian Development Bank (ADB) revised down its GDP growth forecast of Pakistan by 1ppt for FY19 to 4.8% as it sees tight monetary and fiscal policies to impede growth momentum.
Going forward, we expect market to remain volatile as ambiguity on IMF bailout package persists. Investors will also keep an eye on the upcoming monetary policy, which is set to be announced on Sept 29, 2018, where we expect a 100bps rise in interest rates. In such an event, the valuations are likely to taper off by 6.0% – 7.0% for BIPLS Universe. Moreover, investors are also tracking the developments on the prospects of a multi-billion-dollar Saudi investment plan.
NEWS THIS WEEK
Economic highlights & Data points
Current account gap widens to USD2.7bn (Dawn): The current account deficit for 2MFY19 further widened by 10%, compared to the same period of last fiscal – indicating that the deficit trend is still on the rise. The State Bank of Pakistan (SBP) on Wednesday reported that the current account deficit during July-August FY19 increased to USD2.7bn as against USD2.5bn in the corresponding period of last year.
Forex reserves fall to four-month low (The News): Pakistan’s foreign exchange reserves fell to a four-month low during the week ended September 14, the central bank said on Monday, mainly on the back of external debt repayments. The foreign exchange reserves dropped USD279mn, or 1.73%, to USD15.8bn, the lowest since May 2018.
ADB sees growth at 4.8% in FY19 amid looming challenges (The News): Asian Development Bank (ADB) on Wednesday projected growth at 4.8% for the FY19, almost one percentage point down from the last year, as it sees tight monetary and fiscal policies to impede momentum.
SBP sees inflation touching 6%-7% in FY19 (The News): The central bank views consumer price inflation to reach 6%-7% in FY19 as opposed to its earlier estimate of 5.5%-6.5%, which may give it a room for another hike in the upcoming monetary policy announcement.
Sector and Corporate highlights
OGRA increases wellhead gas prices of 23 fields (Tribune): The Oil and Gas Regulatory Authority (Ogra) has increased wellhead gas prices of 23 fields with effect from July 1, 2018, said a notification. According to the notification, the highest 35% increase has been made in the wellhead price of Mari field from PKR141.2/mmbtu to PKR189.2/mmbtu. This has been attributed to the revision in the Petroleum Policy 2012 in an attempt to encourage gas production.
ECC defers planned power tariff hike (The News): The Economic Coordination Committee (ECC) of the federal cabinet yesterday deferred a decision to increase the nationwide electricity tariff until its next meeting, with Finance Minister Asad Umar instructing the Power Division and National Electric Power Regulatory Authority (NEPRA) to first work out how poorer consumers would be protected.
Fuel import bill surges 30% (Dawn): The country’s oil import bill rose by 30%YoY to USD2.6bn in the first two months of FY19 whereas machinery imports registered a 19.2% decline to USD1.6bn.
Tile makers demand cut in gas tariff (Dawn): All Pakistan Ceramic Tiles Manufacturers Association (APCTMA) has urged the government to withdraw increase in gas prices as it would make locally produced tiles uncompetitive in local and global markets. The industry has already been hit by a huge influx of smuggled tiles and imports at lower valuation, capturing over 40% of the country’s tile market of worth nearly PKR80bn.
Textile and clothing exports jump 7.3%YoY (Dawn): Pakistan’s textile and clothing products exports revived in August from a year ago. However, total exports proceeds from the textile and clothing sector jumped 7.3% to USD1.3bn in August from USD1.2bn in the same month last year.
|Stock Market Synopsis|
|Last week||This Week||%Change|
|Mkt. Cap (US $ bn)||67.9||67.2||-1.0%|
|Avg. Dly T/O (mn. shares)||156.8||119.0||-24.1%|
|Avg. Dly T/O (US$ mn.)||51.8||38.5||-25.6%|
|No. of Trading Sessions||4.0||4.0||0.0|
|KSE 100 Index||41,320.1||40,851.8||-1.1%|
|KSE ALL Share Index||30,084.8||29,770.8||-1.0%|