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Stock market at a glance

Market Review

The outgoing week remained volatile where benchmark index closed flat at 39,307pts, exhibiting an increase of 130pts. Market participation remained dull during the week as evident from decline in ADT and ADTV by 14.9%WoW and 13.6%WoW, respectively. Foreign investors were net sellers, exhibiting an outflow of USD9.4mn. During the week, with an aim to support export oriented sectors, ECC decided to clear the outstanding claims worth PKR36bn and allowed duty-free import of cotton. Furthermore, ECC decided that vehicles can only be imported if the duties and taxes are paid in foreign currency by Pakistani nationals. Also, the incumbent government is planning to standardize sales tax at 17% on petroleum products along with imposing FED on cements, beverages, cigarettes, and vehicles. Furthermore, farmers body demanded to waive off GST on locally manufactured tractors owing to declining affordability in the country. Additionally, US-based company ‘Cargill’, showed its intention to invest USD200mn in Pakistan over the next 3-5yrs. Moreover, as per the SBP, LSM posted a decline of 1%YoY during 5MFY19 due to dismal performance in pharmaceuticals, petroleum, steel, and electronics sectors. A state-run Russian firm has also showed its intention to invest USD2.0bn in Pakistan’s water and power sector projects. On the macro front, foreign exchange reserves of the country dropped by USD148mn to USD13.5bn owing to debt repayment. During the 1HFY19, as per PBS, exports and FDI witnessed an increase of 2.2%YoY to USD11.0bn and 19.2%YoY to USD1.3bn, respectively, while imports declined by 3.0%YoY to USD28.0bn. CAD narrowed by 4.4%YoY to USD8.0bn during the 1HFY19. Furthermore, the incumbent government has decided to shelve a major power project of 1,320MW under CPEC owing to excess production capacity now anticipated in the country. Also, Pakistan is seeking a downward revision in RLNG price from Qatar and hopes to receive a credit facility for gas imports to get a cushion for CAD burden.

Outlook

The incumbent government will unveil the ‘Reform Package’ on 23-Jan-2019 with an aim to bring economic reforms in the country and to curtail balance of payment crises coupled with bridging revenue shortfall by imposing different duties and taxes. Resultantly investors will closely track developments regarding new tax measures, however, any negative policy will dampen investor sentiments and market performance.

News This Week
Economic highlights & data points

Forex reserves drop to USD13.5bn (The News): Pakistan’s foreign exchange reserves fell to USD13.5bn during the week ended January 11 from USD13.6bn a week ago, the central bank said on Thursday.

C/A deficit shrinks by 4.4% (Dawn): The government found another reason to sigh with relief on Thursday as the crucial CAD slipped slightly by 4.4% to USD8.0bn, driven by a fourth quarter decline of 10% as per SBP.

July-December exports witness 2.19% increase (BR): Pakistan’s exports during 1HFY19 witnessed an increase of 2.19% from USD10.98bn to USD11.22bn.

FDI plunges 19.2% in July-Dec (The News): Pakistan’s FDI fell 19.2% to USD1.32bn in 1HFY19, figures from the SBP showed on Wednesday. However, the FDI rose to USD319.2mn in December from USD272.8mn a year earlier.

LSM shrinks 0.6% in November (Dawn): The LSM sector shrank 0.6% during November. The sector’s performance also remained lackluster during 5MFY19 as it declined 0.9%YoY due to dismal performance of sectors.

Qatar to be approached for revision in LNG prices (The News): Pakistan will request the Qatari government for revision in LNG prices and credit facility for this super-cooled gas imports to get a cushion for CAD burden.

Govt. puts major CPEC power project on hold (Dawn): PTI government has decided to shelve a major power project pushed by the PMLN regime under the CPEC and will axe hundreds of other schemes under the PSDP later this month.

US-based Cargill to invest USD200mn in Pakistan (Tribune): Executive team of US-based Cargill, the provider of food, agriculture and industrial products, announced plans to invest over USD200mn in Pakistan over the next 3-5yrs.

Finance Minister Asad Umar to present mini-budget on Jan 23 (The News): Finance Minister announced to present the mini-budget on January 23. “Tax anomalies will be removed in the mini-budget,” the finance minister said.

 

Sector and Corporate highlights

Hike in FED on cement, vehicles on cards in mini budget (The Nation): The government is planning to standardize sales tax on petroleum products at 17%. Hike in FED on cements, beverages, cigarettes, and vehicles are also on cards.

ECC allows duty-free cotton imports (Dawn): The government on Tuesday ordered immediate clearance of about PKR36bn refund claims of exporters and allowed tax and duty-free import of cotton.

ECC ties car imports to duty payment in foreign currency (The News): ECC of the Cabinet allowed the import of all new/old vehicles only if the duty and taxes are paid in foreign exchange by Pakistani nationals by themselves.

Russia ready to invest USD2bn in energy projects (Tribune): A state-run Russian firm, Inter RAO Engineering, has offered to invest USD2bn in Pakistan’s water and power sector projects, including Mohmand dam.

SNGPL cuts gas supply to industry, CNG sector (The News): Grossly mismanaged supply chain of LNG has once again led to shutting gas deliveries to industry and transport sectors for an indefinite period.

GST waiver on tractors urged (The News): Farmer body has asked the government to waive GST on locally-made tractors and implements because agriculture sector is the backbone of economy, contributes 24% to GDP.

Stock Market Synopsis
Last weekThis WeekChange
Mkt. Cap (US $ bn)56.757.10.6%
Avg. Dly T/O (mn. shares)138.7118.0-14.9%
Avg. Dly T/V (US$ mn.)46.039.7-13.6%
No. of Trading Sessions5.05.00.0
KSE 100 Index39,049.139,306.50.7%
KSE ALL Share Index28,739.028,917.80.6%

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