Market Review
The benchmark index remained bearish throughout the week where KSE100 decreased to 40,087pts, posting a decline of 1.9%WoW. During the week, market participation remained lackluster as evident from ADT and ADTV which declined by 5%WoW and 6%WoW, respectively. Foreign investors remained net seller in this week, exhibiting an outflow of USD7.0mn.
During the week, Competition Commission of Pakistan (CCP) recommended that, given PKR devaluation, local auto OEMs should not be allowed to increase prices on previously received orders. Additionally, PTCL signed a MoU with SAP, a global technology company, to enhance cloud-based digital business transformation especially in agriculture, banking and education sectors. Moreover, Economic Coordination Committee (ECC) allowed 1.0mn tons of sugar exports to ease the surplus in the country, without giving any incentives on overseas sales. Also, Pakistan Railway and Maple Leaf Cement have inked a MoU for the transportation of coal for a period of 3yrs which would bring transportation cost efficiencies for the company. Additionally, the government decided to maintain the restriction on purchase of vehicles by non-filers. Furthermore, OGRA has increased the gas prices up to 143% to generate ~PKR111bn for the gas utility companies.
On the macro front, SBP exchange reserves declined by USD628mn during the week to USD8.4bn owing to external debt servicing. Moreover, SBP raised the interest rate by 100bps to 8.5% effective from Oct’18. Furthermore, IMF has suggested that Pakistan should increase interest rate to ~11% and depreciate currency to PKR145/USD to narrow inflation and restrict current account deficit. Also, ministry of railway decided to bring down the cost associated with the construction of ML-1 railway track under CPEC from USD8.2bn to USD4.2bn.
Outlook
We expect that any economic decision to tackle the growing macroeconomic challenges by the government and clarity on seeking IMF bailout package may restrict the current downtrend in the market.
News This Week
Economic highlights & Data points
As expected, SBP raises key interest rate by 100bps to 8.5% (Tribune):Â In line with market expectations, the State Bank of Pakistan (SBP) announced on Saturday an increase of 100bps in the benchmark interest rate that went up to a 44-month high at 8.5% with effect from October 1.
Reserves see sharpest fall in years, drop by USD627mn (Dawn): State Bank of Pakistan’s (SBP) reserves suffered one of their sharpest drops hitting its lowest level in four years following a decline of USD627mn to USD8.4bn during the week ending Sept 28 due to external debt servicing, according to data released by SBP on Thursday.
Cost of CPEC’s Railways ML-I project brought down by USD2bn: Sheikh Rashid (The News: The Railways Minister, Sheikh Rashid, on Monday said the estimated cost of expansion and reconstruction of ML-1 [Main Line-I that runs from Peshawar to Karachi] track under the China Pakistan Economic Corridor (CPEC) has been brought down to USD6.2bn from USD8.2bn.
IMF suggests higher interest rate, rupee depreciation (Tribune):Â As disagreement persists on the measures required to put the economy back on a strong footing, the International Monetary Fund (IMF) has suggested to Islamabad to raise interest rate to double digits and let the currency weaken by at least 15% more in the current fiscal year.
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Sector and Corporate highlights
Car bookings drop 30% due to ban on non-filers (Tribune):Â The automobile industry is set to face a massive plunge in sales as car bookings have dropped 30% due to government restriction on vehicle purchase by non-filers of tax returns and its impact is likely to be felt by December this year.
Railways, Maple Leaf Cement sign MoU (BR):Â Pakistan Railway and Maple Leaf Cement has inked a MoU for the transportation of coal for a period of three years which will bring revenue of PKR1.2bn per year, said Railways Minister Sheikh Rashid Ahmed here on Monday.
Ogra notifies up to 143% increase in gas prices (Dawn):Â After three weeks of hiatus, the government on Thursday notified up to 143% increase in natural gas tariff with the aim of generating about PKR111bn.
Car price increase: currency devaluation should not be an excuse: CCP (BR):Â The Competition Commission of Pakistan (CCP) has recommended that car assemblers should not be allowed to increase prices in the name of currency devaluation once booking is done. Automobile manufacturers assemble vehicles from parts sourced from within and outside the country.
PTCL, SAP sign agreement (The News):Â Pakistan Telecommunication Company Limited (PTCL) signed a memorandum of understanding (MoU) with SAP, a global technology company, to enhance cloud-based digital business transformation especially in agriculture, banking and education sectors.
ECC approves 1.0mn tons of sugar exports (The News):Â The Economic Coordination Committee (ECC) of the cabinet on Tuesday allowed 1.0mn tons of sugar exports to ease sweetener surplus in the country, without giving any incentives on overseas sales.
Stock Market Synopsis | |||
---|---|---|---|
Last week | This Week | %Change | |
Mkt. Cap (US $ bn) | 67.2 | 66.4 | -1.2% |
Avg. Dly T/O (mn. shares) | 119.0 | 111.8 | -6.0% |
Avg. Dly T/O (US$ mn.) | 38.5 | 36.6 | -5.0% |
No. of Trading Sessions | 4.0 | 5.0 | 1.0 |
KSE 100 Index | 40,851.8 | 40,087.1 | -1.9% |
KSE ALL Share Index | 29,770.8 | 29,398.9 | -1.2% |