During the week ended 7th October 2016, the trading volume at Pakistan Stock Exchange surged by 14.5 %WoW. The surge came despite rising cross-border tensions and political noise. The benchmark Index closed at 41.200 level.
The factors keeping the market buoyed included the response from global debt market for Pakistan's international Sukuk, positive outlook on Pakistan's banks from Moodys Investor Services and consolidation in global oil benchmarks.
The key news driving the market included: 1) Pakistan issued US$ one billion Sukuk of 5-year tenor at 5.5 percent, 2) some 17 foreign and local strategic investors, including Chinese and US stock exchanges initiating due diligence process for buying 40% stake Pakistan Stock Exchange (PSX) by end November this year, 3) Central Development Working Party (CDWP) approved 23 projects worth Rs31.5 billion, 4) cement dispatches rose 8.3%YoY during first quarter of current financial year with capacity utilization during the quarter rising to 79% and 5) The federal cabinet approved draft Bill for Regulation for Benami transactions according to which any property held in "Benami" can be confiscated by the Government of Pakistan.
Gainers at the bourse were: LOTCHEM, SHEL, SNGP and DAWH. Laggards were: HCAR, PSMC and, PPL. Volume leaders were: BOP, PIAA, PACE and WTL.
Next week will be shortened due to Ahura holidays by two days, likely to keep trading activity muted. Results season coming in mid‐October is likely to offer some triggers may. There is also room for price performance in selected Banking scrips on potential positive surprises from capital gains.
The takeaways from September 2016 included: 1) Pakistan’s central bank leaving interest rate unchanged, 2) members of OPEC tending to agree on containing supply glut by curtailing output and 3) monetary policies of US Fed and BoJ guiding sentiments and performance consequently. That said, political concerns both at home and across the border escalated, restricting gains to a certain extent. Out of the mainboard sector posting major gains were, Autos, Telecommunications and Textiles, while Cements were down on emerging price war concerns amid the recent flurry of expansions by players and Fertilizers due to the reduction in urea prices amid slower offtake. Heavy participation continued in mid‐tier stocks resulting in increased trading volume. Foreigners continued to shy away from the market, selling equities worth US$41.3 million as against selling of US$20.4 million in August 2016.
The cement sector witnessed robust margin improvement backed by declining coal/FO prices to record low levels. Lately, coal price surged due to stringent rules for mines in China, EU's plans to reduce coal usage by 14% in next seven years and tighter supply. Coal price may hold its ground if oil price stability is achieved through OPEC's coordinated output control. In this backdrop, analysts fear a decline in earning. Fears of pricing indiscipline grew with the announcement of the addition of 12.1 million tpa capacities. However, robust domestic demand and normalized exports are expected to keep interest alive.