Market Review
The benchmark index remained bullish during the week after currency devaluation of 5%, increasing 1,516pts to close at 45,030pts, a rise of 3%WoW. The recent PKR depreciation was well received, mainly by the local participants as witnessed by a rise of 10% in ADT and 38% in ADTV. Moreover, foreign participation also exhibited net inflow of USD0.16mn.
During the week, textile exports increased by 7%YoY to USD8.8bn in 8MFY18 as knitwear exports and readymade garments exhibited growth of 13.3%YoY and 13.1%YoY, respectively. Additionally, Unilever announced plans to invest USD120mn to expand its manufacturing operations over the next two years. Furthermore, OGRA has allowed SNGPL to provide 1mn fresh connections within the remaining three months of the current fiscal year. Also, Engro Foods signed an agreement with Greenland Zone to expand its dairy business.
On the macro front, Pakistan’s current account deficit widened by 50%YoY in 8MFY18 displaying mounting pressure on the trade deficit which surged by 22%YoY. Furthermore, government borrowed USD7.7bn in 8MFY18 to sustain the foreign exchange reserves of the country. Additionally, keeping in view of Pakistan’s precarious external account position, increasing debt burden and looming political uncertainty, Moody’s warned Pakistan of a possible downgrade risk to its credit outlook.
Outlook
Though the recent currency depreciation is expected to ease off external account pressure, further slippage in USD/PKR would lead to revision in DR estimates. Moreover, monetary policy due to be released next week would dictate the direction of market.
NEWS THIS WEEK
Economic highlights & Data points
C/A gap widens 50% to USD10.8bn (Dawn): The country’s current account deficit jumped by 50% in 8MFY18. The State Bank of Pakistan reported on Tuesday the current account deficit of the country rose to USD10.8bn during July-February FY18 compared to USD7.2bn SPLY.
Pakistani rupee weakens sharply in likely devaluation by SBP (The News): Pakistan’s rupee weakened sharply against the dollar on Tuesday in what appeared to be currency devaluation by the central bank, traders said, second such intervention in less than four months.
February FDI up by 132% YoY (BR): Foreign direct investment in Pakistan rose by 132% to USD340.8mn in Feb’18 as compared to USD146.7mn in the same month in 2017. According the State Bank of Pakistan’s current data issued on Friday, FDI increased by 15.6% to USD1.94bn during the 8MFY18 against USD1.68bn came in the corresponding period last year.
Govt borrowed USD7.6bn in 8 months (Nation): The federal government borrowed USD7.6bn in eight months (July to February) of the ongoing financial year, which further increased the overall external debt of the country. For the current fiscal year, the government had estimated to receive USD8.1bn in foreign loans, including USD7.7bn loans and USD401.8mn grants.
Moody’s warns Pakistan on downgrade risks amid political uncertainty (The News): Moody’s Investors Service on Wednesday warned Pakistan of downgrade risks to its credit outlook on fragile external account position, higher debt burden, weak infrastructure and political instability.
Budget deficit to reach 6% in 2017-18: IMF (Dawn): Pakistan’s budget deficit for the current fiscal year is likely to reach around 6% of GDP — almost 2% higher than the 3.9% budgetary limit — based on varying projections of the government and the International Monetary Fund (IMF). The IMF had put Pakistan’s fiscal deficit for 2016-17 at 6.3% of GDP — about 0.5% higher than the official accounts closed at 5.8%.
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Sector and Corporate highlights
Textile exports up 7.2% to USD8.8bn in eight months (The News): Textile exports rose 7.2% to USD8.8bn during the first eight months of the current fiscal year of 2018 as value-added sector continued to post recovery in foreign earnings, official data showed on Tuesday.
Unilever plans USD120mn investment for expansion (The News): Unilever, one of the biggest fast-moving consumer goods multinationals, planned to invest USD120mn in expansion of its manufacturing operation in the country over the next two years.
Engro Foods, Greenland Zone ink MoU (The News): Engro Foods Limited has signed a memorandum of understanding (MoU) with Greenland Zone, a leading provider of farming machinery and financial assistance, for boosting its dairy business. The objective of this collaboration is to enhance the productivity of dairy farms, by facilitating the acquisition of modern farm machinery and equipment, while imparting valuable training to the farmers for capacity-building.
USD260mn ADB loan to revamp power transmission network (Dawn): The Asian Development Bank and the Government of Pakistan on Tuesday signed a USD260mn loan agreement to improve the power transmission network in Sindh and Balochistan.
SNGPL to give 1mn fresh connections before polls (Dawn): The Oil and Gas Regulatory Authority (Ogra) has allowed Sui Northern Gas Pipelines Ltd (SNGPL) to spend PKR20bn to provide a record 1mn fresh connections within the remaining three months of this fiscal year.
| Stock Market Synopsis | |||
|---|---|---|---|
| Last week | This Week | %Change | |
| Mkt. Cap (US $ bn) | 82.0 | 80.2 | -2.1% |
| Avg. Dly T/O (mn. shares) | 174.9 | 192.8 | 10.3% |
| Avg. Dly T/O (US$ mn.) | 55.1 | 75.8 | 37.7% |
| No. of Trading Sessions | 5.0 | 4.0 | 0.0 |
| KSE 100 Index | 43,363.2 | 45,030.2 | 3.8% |
| KSE ALL Share Index | 31,607.7 | 32,343.4 | 2.3% |