Market Review
The benchmark index remained bullish during the week (Friday-Thursday), posting an increase of 4.9%WoW, up 1,939pts to close at 41,796pts. Market participation increased as indicated by a rise of 58%WoW in ADT and 37%WoW in ADTV as investors became more active amid building expectations of elections to be held on time. However, foreigners continued their selling spree in this week with a net outflow of USD25mn.
During the week, urea price rose by PKR50/bag to PKR1,630 – 1,640/bag owing to the strong demand of fertilizer for the summer crop. Moreover, steel manufacturers raised the price of high quality rebar to PKR107k – 110k per ton as against PKR97k per ton. Also, SBP imposed 100% cash margin on the import of 131 non-essential items to curb hefty trade deficit. Moreover, ADB agreed to lend USD200mn to establish a fund by the government to fund risk reduction and mitigation activities in the country as a result of natural hazards.
On the macro front, central bank’s foreign exchange reserves decreased to USD9.1bn, down by USD416mn mainly accredited to foreign outflow of debt repayments. Pakistan’s exports increased to USD23.2bn in FY18 as against USD20.4bn SPLY registering a growth of 13.8%, however, it missed the exports target by USD1.7bn. Additionally, SBP increased the key interest rate by 1% to 7.5% for the next two months to curb the increasing inflationary pressure and current account deficit.
Outlook
As general elections are scheduled next week, we expect the market performance to remain contingent upon the strength of new government. Additionally, with the beginning of result season from next week, corporate earnings will dictate the direction of market.
News This Week
Economic highlights & Data points
Monetary policy: SBP increases key interest rate by 100bps to 7.5%| (Tribune): The State Bank of Pakistan (SBP) moved to increase the key interest rate by 100bps to 7.5% for the next two months, as inflationary pressure and current account deficit exact a toll on the national economy.
Government misses exports target by USD1.7bn (Nation): The government missed the exports target by USD1.7bn during previous fiscal year (FY2018) despite giving cash subsidies under the Prime Minister Export Package and sharply depreciating rupee against dollar.
SBP imposes cash margins on imports (The News): The State Bank of Pakistan (SBP) on Monday imposed 100% cash margin on the imports of 131 mostly non-essential items for the consumers in its latest attempt to curb a hefty trade deficit that is depleting foreign exchange reserves at a faster pace.
ADB loans USD200mn for government’s fund to mitigate disaster economic risks (The News): Asian Development Bank (ADB) on Monday agreed to loan USD200mn to a new fund set up by the government to reduce socioeconomic and fiscal vulnerability to natural hazards.
Pakistan attracts meagre USD2.8bn FDI in FY18 (The News): Net foreign direct investment (FDI) increased 0.8% to USD2.8bn in FY18, compared with USD2.7bn during FY17, the central bank data showed on Tuesday.
Forex reserves decline to USD15.68bn (The News): Pakistan’s foreign exchange reserves dropped to USD15.68bn during the week ended July 13 from USD16.08bn a week ago. The foreign exchange reserves held by the central bank decreased USD416mn to USD9.06bn due to external debt and other official payments.
Deficit rises to USD18bn Current account deficit widens to 5.7% of GDP in FY18 (The News): Pakistan’s current account deficit widened to USD18bn or 5.7% of gross domestic product during the last fiscal year of 2017/18, putting rupee at risk of a further big fall and fanning fears about the sustainability of the economic growth.
Pakistan’s borrowing soars to record high at USD11.4bn (Tribune): Pakistan’s borrowing from foreign sources hit a record high at USD11.4bn in fiscal year 2017-18, which broke a one-year-old record, as reliance on external creditors grew due to mounting debt and a steep decline in foreign exchange reserves.
[ads1]
Sector and Corporate highlights
Urea price increases PKR50 to PKR1,630 – 1,640/bag (The News): Urea price rose PKR50 to PKR1,630-1,640/bag as demand of the agricultural key nutrient outstripped its supply to summer crops.
Cost of steel, construction rises with falling rupee (Dawn): A steel dealer said the price of high quality rebar now hovers between PKR107k-110k per tonne against PKR97k per tonne in April.
Power companies seek PKR0.70 per unit increase (Dawn): The National Electric Power Regulatory Authority (Nepra) will take up for usual public hearing on July 24 a petition by Discos seeking an increase in consumer tariff on account of fuel cost adjustment for electricity consumed in June.
CASA-1000 to start power supply in next two years (The News): The much-awaited regional power project CASA-1000 is about to supply electricity from central Asian states to Pakistan and Afghanistan within next two years, a senior foreign diplomat said on Wednesday.
Stock Market Synopsis | |||
---|---|---|---|
Last week | This Week | %Change | |
Mkt. Cap (US $ bn) | 67.7 | 66.7 | -1.5% |
Avg. Dly T/O (mn. shares) | 126.5 | 199.8 | 57.9% |
Avg. Dly T/O (US$ mn.) | 45.3 | 62.2 | 37.2% |
No. of Trading Sessions | 5.0 | 5.0 | 0.0 |
KSE 100 Index | 39,875.1 | 41,795.6 | 4.8% |
KSE ALL Share Index | 29,050.9 | 30,270.6 | 4.2% |