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Stock market at a glance

Market Review

During the week, the incumbent government’s reluctance to accept IMF’s conditions kept the investors at bay, where the index closed in red at 37,167pts, a decline of 2.8%WoW. However, market witnessed positive participation during the week as evident from upturn in ADT and ADTV by 5%WoW and 6%WoW, respectively. Foreign investors continued to remain net seller, exhibiting an outflow of USD1.05mn. During the week, the government deposited PKR25.7bn into the accounts of domestic gas supply companies (SSGC and SNGP) to provide the subsidized gas rate to export oriented sector across the country as promised. Additionally, the textile sector demanded the sales tax refund of PKR100bn to prevent the sector from liquidity crunch. Also, HUBCO showed intention to increase its shareholding in China Power Hub Power Generation Company (Pvt.) Ltd from 26% to 47.5%. Moreover, fertilizer sales fell sharply by 32%YoY to 849k MT in Nov’18 owing to delay in wheat farming. Further, as per the commerce advisor, PSMC is likely to get the green field status for its planned new project with a CAPEX of USD460mn. On the macro front, foreign exchange reserves of SBP plunged by USD591mn to USD7.5bn, down by ~7.3%WoW, owing to debt repayment. In addition, as per the FBR, the government may freeze the corporate tax rate at the present level of 29% going forward to bridge revenue shortfall. Additionally, as per the Ministry of Planning, Pakistan needs to pay USD6.0bn in interest payments under CPEC over the two decade starting form 2021.

Outlook

The end of holiday season in global markets coupled with the new year effect (January effect) may spark some activity from local and foreign participants in the coming week. Furthermore, any positive developments towards IMF program may boost the investor’s confidence in the market.

News This Week

Economic highlights & data points

UAE to deposit USD3.0bn in State Bank of Pakistan (The News): A month after Prime Minister Imran Khan’s meeting with Prime Minister of the UAE, the United Arab Emirates announced its intention to deposit USD3.0bn in the State Bank of Pakistan to support its financial and monetary policy, Emirates News Agency said Friday.

Government mulls freezing corporate tax rate at 29% (The News): The government is considering freezing corporate tax rate at the present level of 29%, owing to economic challenges and substantial decline in revenue collection, sources in the Federal Board of Revenue (FBR) said on Tuesday.

Bailout impasse caused by three IMF conditions (BR): There is a stalemate in ongoing discussions between IMF and Pakistan for a bailout package with the government’s refusal to accept three Fund conditions: free float exchange rate, 22% increase in power tariff and disclosure of the financing details of CPEC projects.

SBP reserves fall by USD591mn (Dawn): The foreign exchange reserves of the State Bank of Pakistan (SBP) fell by USD591mn to USD7.5bn on Dec 21,2018.

Pakistan owes USD6.0bn to China under CPEC (The News): Pakistan needs to pay back USD6.0bn under debt obligations of initiative over the next two decades, the planning ministry said on Wednesday.

 

Sector and Corporate highlights

Government plans to slash WHT on banking transactions (The News): The government planned to slash withholding tax rates on cash and non-cash banking transactions as the direct tax hampered growth of banks with non-banking channels largely being used for the financial dealings, sources said on Friday.

Gas subsidy payment in January bills: SNGPL (The News): The government has transferred a sum of PKR25.7bn into the accounts of SNGPL and SSGC to pay for the promised subsidy in gas to equalize prices across the country.

Textile industry demands PKR100bn in stuck tax refunds (The News): Textile industry on Wednesday urged the government to settle more than PKR100bn in outstanding sales tax refunds, which are causing serious liquidity crunch for manufacturers and exporters.

Fertilizer sales fall 32%YoY to 849,000 tons in Nov (The News): Fertilizer sales sharply fell 32%YoY to 849,000 tons in November as there was a delay in wheat farming and an increase in prices. Urea sales decreased 17%YoY to 497,000 tons in November compared to the corresponding month a year earlier, while di-ammonium phosphate (DAP) off-take declined 47%YoY to 265,000 tons during the last month

HUBCO to increase shareholding in CPHGC (Dawn): Hub Power Company Ltd (HUBCO) and China Power International Pakistan Investment Ltd (CPIPIL) have agreed the valuation and HUBCO now intends to increase its shareholding in China Power Hub Power Generation Company (Pvt.) Ltd (CPHGC), through its wholly owned subsidiary, Hub Power Holdings Limited, from 26% to 47.5%.

Govt. mulls tax incentive for auto expansion project (The News): The government is likely to allow tax exemptions to an auto expansion project proposed by the country’s leading carmaker Pak Suzuki at an estimated cost of USD460mn – an incentive that has been envisaged for newcomers, but is expected to please existing players.

Stock Market Synopsis
Last weekThis WeekChange
Mkt. Cap (US $ bn)56.055.3-1.3%
Avg. Dly T/O (mn. shares)105.1110.35.0%
Avg. Dly T/V (US$ mn.)33.935.96.0%
No. of Trading Sessions5.04.0-1.0
KSE 100 Index38,251.037,167.0-2.8%
KSE ALL Share Index28,384.128,001.3-1.3%

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